Rising inflation might threaten the market’s largest shares, but it surely does have some potential beneficiaries.

The Horizon Kinetics Inflation Beneficiaries ETF (INFL), which launched in January, identifies and teams these names to supply buyers safety in inflationary environments, its co-portfolio supervisor James Davolos informed CNBC’s “ETF Edge” this week.

“The very first thing we need to do is … establish an finish market that we imagine is inflationary, which we broadly discuss with as laborious property, so, a tangible, finite asset that may profit from pricing pressures,” Davolos mentioned in a Monday interview.

Then, his workforce appears for corporations with “capital-light” enterprise fashions — those who do not tackle a substantial amount of threat or spend excessively to be able to flip a revenue — and affordable valuations.

The outcome up to now has been promising. INFL is up practically 18% since its launch and has accrued over $624 million in web property underneath administration.

The ETF’s prime holdings are Charles River Laboratories, Texas Pacific Land Corp., PrairieSky Royalty, Franco Nevada Corp. and Deutsche Boerse. It additionally has substantial positions in Intercontinental Exchange, Wheaton Precious Metals Corp., Archer-Daniels-Midland and Brookfield Asset Management.

“Two areas that you just’d be fairly laborious pressed to argue in opposition to being inflationary over the previous decade are increased training and well being care,” therefore INFL’s prime holding, pharmaceutical service supplier Charles River Laboratories, mentioned Davolos, additionally a vice chairman at Horizon Kinetics.

Charles River helps expedite the early phases of recent drug growth extra cost-effectively than most different organizations, which may lead mega-cap biotech and pharmaceutical corporations to its enterprise when pricing pressures rise, he mentioned.

“They’ve the amenities in place, they’ve the networks, they’ve the databases the place it would not value them very a lot to place much more throughput by way of their current system,” Davolos mentioned.

“To the extent that there is an increasing number of demand in an inflationary surroundings, Charles River’s going to profit each by way of increased quantity and better pricing, sort of having that one-two punch … on the upside.”

Texas Pacific Land’s worth add is a bit of totally different. “Really considered one of a form,” the corporate earns royalties on oil and gasoline manufacturing in West Texas and advantages from developments on the land it owns, Davolos mentioned.

In impact, giants resembling Exxon Mobil, Chevron and EOG Resources pay Texas Pacific to function in its West Texas oilfields and different organizations pay it to construct pipelines, roads, energy strains or water methods on its land, making for cost-efficient returns, he mentioned.

It is related with Franco Nevada, which earns its royalties from the dear metallic mining enterprise, Davolos mentioned. Archer-Daniels-Midland, which processes the world’s crops, ought to earn the next “crushing margin” by pushing increased enter prices to their prospects, he mentioned.

As for the inventory exchanges, they need to profit from inflation’s “ripple results,” Davolos mentioned.

“The Intercontinental Trade, Deutsche Bourse, the CME, they function very giant spinoff exchanges, which permit folks to each hedge and speculate on all of this instability or volatility which may come up as a operate of inflation,” he mentioned. “If there is a couple trillion {dollars} extra [in] notional spinoff quantity, the exchanges spend little or no cash to mainly earn that income and loads of that converts into working revenue.”

INFL’s constructive monitor report is probably going simply getting began, Davolos added.

“I believe the long-term development nonetheless factors to fairly sturdy reflation finally shifting into inflation,” he mentioned.

The ETF closed lower than half of 1% increased on Friday.