“People are buying and holding these for an extended period of time. They were meant to be used for positions in intraday volatility and should be sold by the end of the day. But, you can tell that the shares are held for much longer periods exposing investors to additional costs. Institutional holding are very small so retail investors must be holding on for far too long. My calculations show that over $4 billion has been lost by investors who have been long these products since they were launched,” he added.
Room for improvement is creating something that behaves like the VIX and that can happen.
“We’ve heard that market makers and institutions are very interested in being able to access more accurate pricing and liquidity. This would open up buy and hold strategies by institutions, which make a great deal of sense as a portfolio hedge, even though the correlation is hugely negative. If you can get something that behaves like VIX it opens up opportunities. Pension funds and endowments would be able to offered a huge diversifier,” said Whaley.
AccuShares products are designed to provide exposure to key alternative asset classes, including volatility, energy, and commodity products. The firm was founded by Jack Fonss, Ned Cataldo and Forrest Gilman.
In addition to Whaley, ETF industry veteran, Richard Goldman is also a partner in the firm. Goldman, was CEO of Rydex Investments and subsequently COO of Guggenheim Investments following the Guggenheim acquisition of Rydex.
The remaining ETFs are designed to provide commodity price exposures as measured by the S&P GSCI® Spot and some of its sub-indices.
These ETFs are:
- AccuShares S&P GSCI Spot Fund
- AccuShares S&P GSCI Agriculture and Livestock Spot Fund
- AccuShares S&P GSCI Industrial Metals Spot Fund
- AccuShares S&P GSCI Crude Oil Spot Fund
- AccuShares S&P GSCI Brent Oil Spot Fund
- AccuShares S&P GSCI Natural Gas Spot Fund
Each ETF is designed for investors seeking cost-effective, targeted and transparent exposure to various spot and spot proxy prices represented by the ETF’s Underlying Index. AccuShares intends to offer 2 Classes of Shares in each ETF, one designed for investors with a positive view of future index performance and one designed for investors with a negative view of future index performance, according to a statement.