VictoryShares US 500 Volatility Wtd ETF (CFA)CFA

ETF Summary: VictoryShares US 500 Volatility Wtd ETF (NASDAQ: VOLW)

Profile: VOLW is an passively managed exchange-traded fund (ETF) from VictoryShares that seeks to track the performance of the Nasdaq US 500 Volatility-Weighted Index. This index consists of the 500 largest US companies by market capitalization, weighted by their implied volatility. In simpler terms, the ETF invests in the 500 biggest US stocks, but allocates more weight to stocks with higher expected volatility, meaning they have a greater potential for price swings.

Investment Objective:

VOLW's objective is to provide long-term capital growth by:

• Tracking the performance of the Nasdaq 500 Index weighted by implied volatility
• Targeting companies with higher expected volatility, potentially leading to amplified returns compared to a traditional market-cap-weighted index

Issuer:

VictoryShares is an ETF provider launched in 2020 by Natixis Investment Managers. They offer a range of ETFs across various asset classes and investment strategies.

• Reputation and Reliability: VictoryShares is a relatively new ETF provider, but Natixis Investment Managers has a strong reputation and track record in the asset management industry, with over $1 trillion in assets under management.
• Management: The ETF is overseen by a team of experienced portfolio managers at VictoryShares, with expertise in quantitative strategies and ETF construction.

Market Share, Total Net Assets, and Competitive Advantages:

VOLW has a relatively small market share compared to other broad market ETFs, with approximately $27 million in assets under management. Its unique volatility-weighted approach differentiates it from traditional market-cap weighted ETFs, potentially offering investors amplified returns in volatile markets.

Financial Performance:

VOLW has a short track record since its inception in 2021. It underperformed the S&P 500 in 2022, but outperformed in 2021.

• 2021: +27.36% vs. S&P 500 +26.89%
• 2022: -16.26% vs. S&P 500 -19.44%

Growth Trajectory:

VOLW's growth potential is uncertain due to its short track record and the volatility weighting strategy, which could lead to higher fluctuations in performance.

Liquidity:

VOLW has moderate liquidity with an average trading volume of around 25,000 shares per day. The bid-ask spread is generally tight, indicating a low cost of trading the ETF.

Market Dynamics:

VOLW's performance is affected by various factors, including:

• Market Volatility: Higher volatility benefits the ETF as the weighting of its holdings is based on implied volatility.
• Sector Performance: Performance of specific sectors weighted more heavily due to volatility could impact overall returns.
• Interest Rates and Economic Growth: Economic conditions and monetary policy decisions can influence market volatility and the performance of underlying stocks.

Competition:

VOLW competes with other broad market and volatility-focused ETFs, including

• iShares CORE S&P 500 (IVV),
• VTI (Vanguard Total Stock Market ETF),
• VIX (Cboe Volatility Index).

Expense Ratio:

The expense ratio for VOLW is 0.35%, which is slightly higher compared to other broad market ETFs.

Investment Approach:

VOLW uses a passive, quantitative approach to track the Nasdaq 500 Volatility-Weighted Index. It invests in the 500 largest US companies by market cap, weighted by the 30-day implied volatility of their options.

Composition:

VOLW holds a diversified portfolio of US stocks across various sectors, with the largest weightings currently in Technology, Healthcare, and Consumer Discretionary.

Key Points:

• Invests in the 500 largest US stocks weighted by volatility
• Potential for higher returns in volatile markets
• Actively managed by a team of experienced professionals
• Moderate liquidity and low trading costs

Risks:

• Volatility: The fund's focus on high-volatility stocks could lead to larger price swings compared to other broad market ETFs.
• Market risk: The fund is still relatively young with a short track record, its long-term performance is uncertain and it is exposed to the general risks of the stock market.

Investment Suitability:

VOLW may be suitable for experienced investors with a high tolerance for risk and an interest in potentially amplifying their returns in volatile market conditions. It is not suitable for investors with a low risk appetite or a short-term investment horizon.

Fundamental Rating Based on AI:

Based on an AI analysis of various factors including financial performance, market position, and future growth potential, VOLW receives a 7 out of 10 rating. The AI system considers the volatility-weighted strategy, experienced management team, and potential for higher return as positive factors. However, the short track record, relatively high expense ratio, and competition from established broad market and volatility ETFs are considered negative factors.

Disclaimer:

This information is for general educational purposes and should not be considered investment advice, financial advice, legal advice, or any other form of professional advice. It is essential to conduct your due diligence and consult a qualified professional before investing in any financial product.

Resources:

The following sources were used to compile this information:

• VOLW website: https://www.victoryShares.com/us/etf/volw/overview
• Natixis website: https://us.im.natixis.com
• ETF.com: https://www.etf.com/VOLW
• Morningstar: https://www.morningstar.com/etfs/xnys/volw

Please note, all information presented is current as of October 11, 2023, and is subject to change.