In a sea of strategies within equities, the NightShares ETF suite, which seeks to capture the “night effect,” stands out as an innovative approach to equity investing. The funds are based on the premise that overnight trading when markets are closed can often result in different, and often lesser, volatility as well as returns differentiated from daytime trading when markets are open. The NightShares 500 1x/1.5x ETF (NSPL) seeks to leverage the potentials of the night effect.
NSPL seeks to amplify the night effect while also offering daytime trading exposure. NSPL seeks to deliver 1x (100% correspondence) to the S&P 500 during the day, providing exposure to equity performance that advisors and investors are familiar with. The fund also seeks to capture leveraged exposure to night time trading of 1.5x, or 150% of overnight portfolio performance, for a single day — defined by the time between each NAV calculation.
NSPL seeks to amplify overnight performance because historically (over the last two decades), overnight trading sessions have proven to offer a differentiated return profile than daytime trading for U.S. large-cap equities according to the Federal Reserve Bank of New York.
The fund gains its equity exposure through both individual securities and ETFs instead of an index because of their ability to post both opening and closing values on a daily basis, and then it invests in swap agreements and futures to provide leveraged exposure and achieve overnight returns.
The fund is actively managed, and as it is a leveraged product, returns should be considered on a day-to-day basis. Measuring the returns of the fund over a longer period results in compounding the daily performance that can vary in both direction and amount, and may not reflect the 1.5x nighttime objective of the fund.
Holding the fund over consecutive days can result in a loss of money if the performance is flat, with compounding exacerbated the longer the fund is held, in times of higher market volatility, and higher leveraged exposures.
NSPL is up 9.18% YTD and has an expense ratio of 0.67%.
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