With negative correlation to equities – and most other asset classes – volatility can be used to enhance returns, manage risk and potentially provide an additional source of alpha to a portfolio.
The Fund is a volatility-focused strategy designed to capture alpha from liquid exchange-traded VIX1 options. Mathematical models are used to detect and exploit pricing inefficiencies in the options market.
It aims to generate long-term absolute returns that are negatively correlated to the S&P 500 Index ® (SPX)2. It is expected that the investment strategy will perform best in periods where the S&P500 (SPX) is falling and volatility is high. In periods where the SPX remains stable or increases only steadily, the Fund aims to generate cash-like returns.
A rigorous risk framework minimises potential for loss and unlike some alternative investments, it’s a liquid investment – when equity markets fall, liquidity in the VIX generally rises.
The Fund at a glance
- Provides access to the potential diversification benefits of volatility
- Invests in liquid exchange-traded options and cash instruments
- Access to capital – priced daily, with applications and withdrawals processed each business day
- It provides exposure to an asset class that would otherwise be difficult for an individual investor to access
- It’s a unique product, the only options-based volatility fund available to Australian retail investors.
1 The CBOE Volatility Index® (VIX®) is a Registered Trademark of the Chicago Board Options Exchange (CBOE)
2 Standard & Poor’s and S&P are registered trademarks of Standard & Poor’s Financial Services LLC (S&P), a part of McGraw Hill Financial Inc.