Equities are often used to hedge against inflation because they represent ownership in real assets that can grow in value. Companies generally have the ability to pass on inflationary costs to consumers, which can preserve or enhance their profitability and the equity value.

Lower cost (B): Equities may incur higher transaction and management costs than other asset classes.

Align liabilities (C): While equities offer returns, liability alignment is more relevant to fixed-income assets.

Low volatility (D): Equities are more volatile than bonds or cash, making this statement incorrect.

References:

International Certificate in Wealth & Investment Management: Equities as inflation hedges and their risk/reward profile.

Historical analysis of equity performance in inflationary periods.