Exchange traded funds now offer ways for investors to utilize institutional styled strategies to help ride changing market conditions. For instance, VelocityShares recently launched two new hedged-equity products that help mitigate market volatility.
On Monday, the VelocityShares Volatility Hedged Large Cap ETF (NYSEArca: SPXH) and the VelocityShares Tail Risk Hedged Large Cap ETF (NYSEArca: TRSK) began trading.
SPXH tries to reflect the performance of the VelocityShares Volatility Hedged Large Cap Index, which hedges “volatility risk” in the S&P 500. Essentially, the fund takes a long position in the S&P 500 and a short position in short-term VIX futures, and it tries to target a net neutral exposure. The fund has a 0.71% expense ratio.
The ETF’s current holdings include Vanguard S&P 500 ETF (NSYEARca: VOO) 33.5%, iShares CORE S&P 500 ETF (NYSEArca: IVV) 33.4%, SPDR Trust Series 1 (NYSEArca: SPY) 33.3% and a -18.3% position in S&P 500 VIX Futures VAR L/S Index TRS.
TRSK tries to reflect the performance of the VelocityShares Tail Risk Hedged Large Cap Index, which is designed to hedge the “tail risk” – normal distributions beyond three standard deviation, or more skewed distributions – in the S&P 500. The fund also takes a long position in large-cap equities and a short position in VIX futures. The ETF has a 0.71% expense ratio.