“As a low volatility strategy that can be used to replace fixed income, DIVY offers capital appreciation potential that has consistently delivered low correlation and low drawdowns across market environments,” according to RealityShares.
While DIVY only returned 8.0% year-to-date, slightly underperforming the equities market, the alternative ETF strategy provides limited volatility for those more faint of hear, especially as we witnessed huge market swings in recent years. DIVY exhibits high Sharpe Ratio and a small standard deviation, reflecting the fund’s attractive risk-adjusted returns.
“DIVY is a strategy that would produce 5% to 6% long-term returns without a whole lot of volatility,” Ervin said.
DIVY is not your traditional dividend ETF strategy. The actively managed fund looks to capture dividend growth via an array of strategies in an effort to generate long-term capital appreciation. DIVY’s holdings can include listed option contracts, dividend swaps, futures and forwards on indexes of Large Cap Securities or exchange traded funds designed to track large cap securities indexes.
The active ETF can purchase index options contracts in an effort to adapt to changes in the expected dividend values reflected in the option prices. These option combinations are designed to reflect expected dividend values and eliminate the Fund’s exposure to changes in the trading prices of the Large Cap Securities.
“Institutional investors have been investing in dividend growth for more than 15 years, but DIVY is the first isolated dividend growth strategy offered in an easily tradable ETF,” Ervin added.