Today we were made aware of a portfolio composition change in an ETF which has been a recipient of increased attention, especially in the recent volatile equity environment, VSPY (Direxion S&P 500 RC Volatility Response, Expense Ratio 0.45%).
The fund tracks the “S&P 500 Dynamic Rebalancing Risk Control Index”, which encompasses both equities (S&P 500) and U.S. Treasury Bills. The fund has blended “Equity” or “Cash” exposure accordingly, via the two aforementioned segments of the market. In any case, in what we see as a “response to recent volatility”, the fund has moved more towards the “Cash” or fixed income component this week, with more precisely only 59.84% of the portfolio in equity as of today.
Just a few weeks prior the fund was 100% invested in equity and had zero fixed income exposure. The fund falls in the “Large Cap Blend Equity” category and has quietly raised about $38 million since its 2012 inception.
Given the fact that the VIX is simply not a reliable and all encompassing “Risk Measure” for investors to monitor in accordance to what the markets are seeing, newer products like this that dynamically adjust equity exposure given changes in the risk atmosphere and potential volatility in markets, are interesting to monitor closely, especially if the targets are directionally right in the short, medium, and longer terms. VSPY does not trade a ton of volume, and has been a bit quiet lately, but it can have days where it averages more than 200-400k shares on daily spurts, as it did back in the September time frame.
This said, the fund averages about 100,000 shares on an average daily basis traded, which is nice to see in a strategy that may not be readily recognizable to all. “Large Cap Blend Equity” is such a broad category in the ETF landscape, with behemoths such as SPY (SPDR S&P 500, Expense Ratio 0.09%), IVV (iShares Core S&P 500, Expense Ratio 0.07%), and VOO (VanguardS&P 500, Expense Ratio 0.05%) which collectively have >$253 billion in AUM across them.