They are diversification tools, but they're not perfect hedges. Persistently high inflation, such as we saw in the late 1970s and early '80s, can kill cash and bond investors. That's why more people are diversifying into commodities, real estate investment trusts, and other asset classes.ON TREASURY INFLATION-INDEXED SECURITIES
TIIS are expected to provide slightly lower returns than Treasury bonds because you pay a premium to hedge away inflation risk. They should, however, outperform Treasuries when inflation exceeds the bond market's expectations and underperform them when it lags.