The popularity of mutual funds and exchange-traded funds holding Treasury inflation-protected securities (TIPS) is on the rise as investors look for hedging protection ahead of what many expect will be a surge in inflation, the Wall Street Journal reported Thursday.

Unlike other bonds and stocks that lose value in the face of inflation, TIPS' principal grows with it. And so far in 2009, the government-issued bonds have attracted more than $17 billion in new assets, with a significant portion of that coming from exchange-traded funds.

The actual returns that TIPS deliver, however, may not line up with what investors expect. Investors need to understand the market before they jump in.

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