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New iPath ETN Debuts Dynamic Volatility Play

Cinthia Murphy

Barclays Bank, the global financial services provider behind the iPath ETNs, is adding to its roster of volatility-linked ETNs with the launch of its first dynamic volatility strategy, designed as a tool for investors to benefit from volatility spikes while managing the roll cost during calm markets.

The iPath S&P 500 Dynamic VIX ETN (NYSEArca:XVZ) is designed to give exposure to the S&P 500 Dynamic VIX Futures TR Index, which allocates between the S&P 500 Short-Term Futures Index Excess Return and the S&P 500 VIX Mid-Term Futures Index Excess Return by monitoring the steepness of the implied volatility curve.

XVZ joins the iPath S&P 500 VIX Short-Term Futures ETN (NYSEArca:VXX - News) and the iPath S&P 500 VIX Mid-Term Futures ETN (NYSEArca:VXZ - News), all of which are focused on volatility through the CBOE Volatility Index (VIX), also known as the fear gauge.

The notes, which were brought to market on January 2009, have resonated with investors. VXX has gathered $1.1 billion in assets since its inception, while VXZ amassed $511 million, according to data compiled by IndexUniverse.

“As investors are increasingly looking for ways to access equity market volatility, this ETN offers them exposure while aiming to reduce the roll cost during calm markets and potentially providing enhanced beta to the VIX Index during more volatile periods,” Eric Schlanger, head of U.S. Flow Derivatives at Barclays Capital, said in a press release.

XVZ comes with a yearly fee of 0.95 percent, while VXX and VXZ each cost 0.89 percent. ETNs, unlike ETFs, are unsecured, unsubordinated debt securities.

 

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