TIPS, particularly those with shorter duration and thus low sensitivity to interest rates, are expected to provide a reliable inflation hedge to investors for which inflation is a substantial risk (e.g., pensions for which benefits are indexed to inflation, as well as endowments and foundations). For such investors, short duration TIPS, combined with real assets, would serve as the backbone of an inflation-protection program in their portfolios. That said, a market-duration TIPS portfolio will be at least as sensitive to changes in interest rates as it is to changes in inflation expectations. Being issued by the US Treasury, TIPS can also play the role of high quality bonds, serving as a unique kind of ballast. As with other Treasury bonds, TIPS’ modest level of returns means that substituting them for other investments in a portfolio comes with an opportunity cost.