2022 saw Canada's inflation rate (as measured by year-over-year changes in the Consumer Price Index, or CPI) rise steadily. Starting at a 5.1% increase in January 2022, inflation crept up steadily to peak at 8.1% in June 2022, before settling down to 6.8% in November 2022.

Multiple asset classes suffered substantial drawdowns during this time, with long-term bonds and technology sector ETFs suffering particularly hard. Conversely, energy sector ETFs posted fantastic double-digit returns to recoup the losses they suffered during the COVID-19 pandemic.

Still, there were some ETF winners outside of the energy sector. Some uniquely designed ETFs managed to shine despite the adverse market conditions. Let's take a look at three notable Canadian ETFs that were able to overcome inflation this year.

Purpose Diversified Real Asset Fund (PRA) 

PRA is a highly innovative ETF that combines both equities and commodities designed to shield a portfolio against inflation. Currently, PRA's holdings span industries like agriculture, energy, base metals, precious metals, and real estate. The ETF is actively managed and charges an expense ratio of 0.91%.

What's interesting about PRA is the ETF manager's decision to not only hold commodities like gasoline, crude oil, gold, aluminium, palladium, corn, soybeans, and silver but also the stocks of companies involved in producing these commodities along with real estate stocks.

Each section of PRA's portfolio (agriculture, real estate, energy, base metals, precious metals) is weighted based on risk. That is, each of these five segments is allocated to contribute an equal portion of PRA's overall volatility. This is a risk parity approach that historically has been very effective.

This approach provides both the returns of stocks and the low correlation and resistance to inflation that commodities provide. From January 1st to December 23rd, PRA is up 18.94%. The dual approach has helped PRA post a positive annualized return of 5.53% since inception, unlike many commodities ETFs.

BMO Global Infrastructure Index ETF (ZGI)

Investors looking for a lower-cost, passively managed alternative to PRA can consider ZGI. This ETF tracks the Dow Jones Brookfield Global Infrastructure North American Listed Index, which holds U.S. and Canadian infrastructure stocks subject to minimum market cap and trading volume requirements.

ZGI currently has 50 holdings with assets under management (AUM) totalling $595 million. The majority of ZGI is composed of pipeline companies (36.49%), followed by electric utilities (29.14%), REITs (20.80%), gas utilities (5.99%), and water utilities (5.51%).

71.57% of the companies are U.S. listed, with 21.44% being Canadian-listed and a small allocation listed on U.K., Mexican, and Brazilian exchanges. In my opinion, ZGI is a great way to obtain the most inflation-resistant industries in the real estate, energy, and utility sectors via a single ticker.

As of November 30th, ZGI was up 8.86% year-to-date. BMO will update the performance figures for December once the month is over, so interested investors should keep an eye on that. ZGI currently charges an expense ratio of 0.61%.

iShares Global Infrastructure Index ETF (CIF)

Investors partial to BlackRock iShares or seeking a possible tax-loss harvesting partner for ZGI can consider CIF. This ETF tracks the Manulife Investment Management Global Infrastructure Index, which holds infrastructure companies involved in transportation, water utilities, and electrical services.

Compared to ZGI, CIF has fewer U.S. holdings (48.52%) and more Canadian holdings (38.12%), making its distributions slightly more tax effective due to the lower foreign withholding tax. The rest of CIF is held in Brazilian, Mexican, and Israeli companies.

CIF also has more of a utility sector tilt compared to ZGI at 49.34% of its holdings. Coming in second are capital goods at 24.94%. These are companies involved in producing commodities used by others to manufacture products and services for consumer use.

As of December 27th, CIF has returned 7.83% year-to-date. The ETF is up an annualized 6.87% since its inception in August 2008. CIF has attracted an AUM of around $314 million and currently charges an expense ratio of 0.73%, higher than ZGI but lower than PRA.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.