IVOL is the first-of-its-kind ETF that is long fixed income volatility and designed to hedge against and profit from a steepening yield curve
GREENWICH, Conn., May 14, 2019 /PRNewswire/ -- Quadratic Capital Management (Quadratic) today announced the launch of its first exchange-traded fund, the Quadratic Interest Rate Volatility and Inflation Hedge ETF (NYSE Arca: IVOL).
IVOL is a first-of-its-kind fixed income ETF i which seeks to hedge against an increase in inflation, and to profit from an increase in interest rate volatility and a steepening of the yield curve, whether that occurs via rising long-term interest rates or falling short term interest rates. A steepening yield curve has historically been associated with large equity market declines.
Managed by Quadratic's Managing Partner and Chief Investment Officer Nancy Davis, IVOL is an actively managed ETF built to utilize Quadratic's in-depth knowledge of the OTC option markets.
"I could not be more excited to launch IVOL in the current market environment with volatility at generational low levels and the flat nature of the yield curve," said Davis, who was Head of Credit, Derivatives and OTC Trading for Goldman Sachs' proprietary trading group before founding Quadratic. "No other active or passive ETF provides its investors access to this market. This access is the key to IVOL's many applications."
IVOL may provide a potential hedge for numerous components of an investor's portfolio, including:
- Fixed Income: IVOL seeks to provide steady, inflation-protected income, a hedge against increasing inflation, and a potential asymmetric payoff when long-term interest rates become higher than short-term interest rates.
- Equities: IVOL may act as a tail hedge, as historically the curve has steepened in large equity sell-offs.
- Real Estate: IVOL may help hedge the risk of real estate asset depreciation brought on by rising long term interest rates.
- Volatility: IVOL seeks to provide an attractive new means through which investors can add long volatility exposure without some of the structural drawbacks of current offerings in the market.
"IVOL is the next big step in the democratization of the markets. IVOL provides access to the largest OTC markets that have previously been largely unavailable to most advisors and the vast majority of investors," Davis continued.
About Quadratic Capital
Quadratic Capital Management is an innovative asset management firm founded in 2013 by Nancy Davis. The firm has utilized its significant expertise in the options markets to construct IVOL.
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The fund's investment objectives, risks, charges and expenses must be considered carefully before investing. The prospectus contains this and other important information about the company and may be obtained by calling 1-833-486-5383. Please read it carefully before investing.
Investing involves risk. Principal loss is possible. ETF shares are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. The Fund's derivatives may give rise to a form of leverage. Leverage magnifies potential for gain and the risk of loss. Options prices can be highly volatile. Option use can lower total returns. OTC options generally have more flexible terms negotiated between the buyer and the seller making them subject to greater credit, counter-party, and liquidity risk. Debt securities typically decrease in value when interest rates rise which is usually greater for longer term debt. The Fund seeks to mitigate the risk associated with a steepening swap curve ("curve risk") on the performance of U.S. government bonds by investing in products designed to appreciate in value when the swap curve steepens. Such instruments are not intended to mitigate credit risk or non-curve interest rate risk. There's no guarantee the Fund will achieve its objective. When the swap curve flattens, the Fund will generally underperform a portfolio comprised solely of U.S. government bonds. A flattening curve environment may result in disproportionately larger losses in the Fund's options as compared to its gains or losses in the U.S. government bonds attributable to interest rate changes. Investing in interest rates derivatives, including through options tied to the shape of the swap curve, is speculative and can be extremely volatile. The Fund is non-diversified.
IVOL is distributed by SEI Investments Distribution Co. (SIDCO), 1 Freedom Valley Drive, Oaks, PA 19456. The Fund's sub-adviser is Quadratic Capital Management LLC (Quadratic). SIDCO is not affiliated with Quadratic
i Based on Bloomberg reporting as of 5/8/2019, IVOL is the only US derivative based ETF to utilize OTC interest rate volatility options.
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