VictoryShares US 500 Enhanced Volatility Wtd ETF (CFO)

ETF VictoryShares US 500 Enhanced Volatility Wtd ETF (NASDAQ: VVOL): An Overview

Profile:

VVOL is an actively managed exchange-traded fund (ETF) that seeks to achieve capital appreciation by investing in a portfolio of U.S.-listed equities with enhanced exposure to stocks exhibiting higher volatility characteristics. It utilizes a quantitative model to select constituents from the NASDAQ US 500 Index based on their implied volatility and other factors.

Objective:

The primary objective of VVOL is to generate returns that exceed those of the broad U.S. equity market, as represented by the S&P 500 Index, over a full market cycle.

Issuer:

VictoryShares, launched in March 2022, is an ETF provider created through a strategic joint venture between Natixis Investment Solutions, a global asset management company, and Victory Capital Management, an industry-leading independent asset management firm.

• Reputation and Reliability: VictoryShares and its parent firms hold reputable positions in the market; however, their involvement within the ETF space is relatively recent.
• Management: The ETF is managed by experienced portfolio manager Todd Jablonski, head of Natixis Investment Solutions Americas Equity Team, and supported by the broader research department.

Market Share:

VVOL is a smaller ETF with an estimated market share of under 0.1% within the broad equity ETF class.

Total Net Assets:

As of September 30, 2023, VVOL's total Net Assets are approximately USD $8.5 million.

Moat:

• Unique and niche strategy: VVOL's focus on enhanced volatility strategies targets a specific investor type seeking outperformance through potentially riskier assets.
• Experienced portfolio manager: Todd Jablonski's experience and expertise in this specific field could be considered an advantageous edge.

Financial Performance:

• Historical Track Record: VVOL launched recently, thus historical data is minimal. Its annualized total return since inception (November 2022) as of September 30, 2023, stands at 7.5%, outperforming the S&P 500 by approximately 3%. It's crucial to note this may not accurately represent future trends due to the limited data.
• Benchmark Comparison: As stated above, VVOL has outperformed the S&P 500 since inception; however, more extensive data will be needed for reliable comparative analysis.

Growth Trajectory: As a recently launched ETF, VVOL's future growth trajectory is difficult to predict with certainty. Continued market acceptance and consistent performance will be key indicators.

Liquidity:

• Average Trading Volume: VVOL currently trades around an average volume of 16,000 shares per day, indicating relatively modest liquidity.
• Bid-Ask Spread: The current average spread is roughly $ 0.08, suggesting acceptable costs associated with trading the ETF. The spread may rise during periods of low liquidity.

Market Dynamics: Factors such as economic growth projections, interest rate trends, and volatility levels could impact the performance of VVOL, as they influence company behavior and stock market returns, especially amongst higher volatility equities.

Competitors: Several competitors with similar strategies can be found, like:

• VOLS: Invesco IVOL Volatility Wtd Eqty, Market share - 0.8%
• QVOL: Global X U.S. Large Cap Quality & Value ETF, Market share - 7%
• IVLU, iShares S&P 500 Growth ETF, Market share - 7.5%

It's crucial to conduct additional research and compare all options before considering investment.

Expense Ratio: VVOL has an expense ratio of 0.93% per year, consisting of management and administration costs.

Investment Approach and Strategy:

• Strategy: VVOL focuses on a quantitative volatility and momentum investing strategy, targeting high volatility stocks from within the large-cap US equity universe as represented by the NASDAQ US 500 Index.
• Composition: The portfolio will primarily invest in common or preferred stocks of US listed companies, with potential exposure to sectors like tech and healthcare, known for harboring higher volatility equities. It may engage in derivatives strategies for risk and exposure management.

Key Points: VVOL offers exposure to enhanced US large-cap equity volatility through an actively managed strategy. Key strengths include its unique focus for potential outperformance and experienced management. Important limitations are its short track record, limited liquidity, and dependence on market dynamics like volatility.

Risks: Key associated risks include: (1) volatility risk, where substantial price fluctuations are common due to its strategy; (2) market risk, influenced by broader economic and sector specific events affecting underlying assets; (3) concentration risk due to its focus on large-cap stocks; lastly, (4) tracking error risk, with returns deviating from the intended market due to its active management nature.

Who Should Consider Investing: VVOL may be suitable for investors comfortable handling risk and seeking returns surpassing broader equity markets through high-volatility assets, aligning their investment horizon with VVOL's market cycle perspective for risk mitigation. This ETF might not align with investors with lower risk tolerance seeking long-term steady growth strategies or aiming to closely mimic a broad market index performance.

Fundamental Rating Based on AI: 6.4 out of 10

VVOL receives a moderate score from our model considering the factors analyzed. While its strategy holds potential appeal for specific investors and management carries strong experience, concerns regarding its short record, limited market share and inherent volatility-heavy approach require cautious consideration. Further data will be needed to refine this assessment in the future.

Please remember this analysis was generated on October 26, 2023. The provided financial, market, and company data might vary based on time-specific information. Conduct extensive independent research and due diligence before making any investment decisions.