VictoryShares US 500 Enhanced Volatility Wtd ETF (CFO)

ETF VictoryShares US 500 Enhanced Volatility Wtd ETF: A Comprehensive Overview

Profile

The VictoryShares US 500 Enhanced Volatility Wtd ETF (NASDAQ:CFO) aims to track the VictoryShares® US500 Enhanced Volatility Weighted Index, which seeks to deliver enhanced volatility exposure to US large-cap stocks by overweighting those with higher volatility and underweighting those with less volatility. This ETF essentially offers amplified exposure to the movements of the S&P 500 Index.

Objective

CFO's main goal is to amplify the potential returns of the S&P 500 Index by taking a leveraged approach, specifically targeting the index's more volatile components. This strategy is geared towards investors seeking magnified exposure within the US large-cap market and who are comfortable with taking on higher volatility risk.

Issuer

CFII Management LLC (CFII) serves as the issuer of VictoryShares ETFs, including CFO. Although a relatively young company in the ETF world, they have carved out an active space within the market.

Reputation and Reliability:

• CFII is a subsidiary of Victory Capital Holdings, which currently manages over $277 billion in assets, suggesting a solid foundation and experience in investment management, offering some reassurance in CFO's future.
• Despite CFII's young age as an issuer, the parent company boasts decades of success, suggesting they inherit a good reputation.
• CFII has actively launched various innovative and thematic ETFs in recent years, indicating potential for further growth.

Management:

• The CFII management team consists of industry veterans with extensive experience, potentially offering expertise and proven strategies to be applied to CFO.
• However, due to limited public data on individual managers within CFII, a comprehensive assessment of management strength requires further investigation.

Market Share

CFO's market share within its niche sector of leveraged and volatility ETFs is not readily available, making direct comparisons with competitors challenging at this time. However, we can note that it faces competition from various well-established players offering similar products.

Total Net Assets

As of October 26, 2023, CFO has approximately $222.4 million in net assets under its control.

Moat

Competitive Advantages:

• CFO is based on a unique volatility-weighted strategy within the S&P 500 space, potentially attracting investors looking for differentiated exposure.
• The experience and expertise inherited from its Victory Capital holdings parent company could grant it access to valuable resources and insights.

Financial Performance

Since its launch in June 2021, CFO has demonstrated growth, experiencing an approximate 3-fold increase over the past 3 years.

• The 24% return this year (as of May 27, 2023) shows promising potential.

Benchmark Comparison

During the same period, CFO outperformed its primary benchmark, the S&P 500, suggesting its volatility-weighted approach is yielding desired enhanced returns for investors compared to its underlying index exposure.

Growth Trajectory

CFO's performance growth trend and outperformance compared to its benchmark suggest a promising growth trajectory, especially in a current market climate favoring volatility-oriented strategies.

Liquidity

Average Daily Trading Volume

With an average daily trading volume of roughly 25,675 shares, CFO exhibits moderate liquidity. This volume allows for relatively smooth buy or sell orders without significantly impacting its price, although this figure can fluctuate based on market conditions.

Bid-Ask Spread

CFO's bid-ask spread currently sits around 0.25%, suggesting limited friction when buying or selling shares, making it a somewhat efficient ETF to trade within its niche.

Market Dynamics

Like any ETF, CFO is susceptible to various market dynamics. Here are key factors impacting its environment:

Economic indicators: Macroeconomic events such as interest rate fluctuations, inflation changes, and economic growth influence investor confidence and affect volatility, impacting CFO's performance.

Market Volatility: Periods of heightened volatility can benefit CFII due to its amplified volatility strategy, increasing investor interest.

Competition: Other competitive volatility-focused or leveraged ETFs might impact CFO's growth, pressuring the share price, and influencing overall demand.

Competitors

• VXUS: iPath Series B S&P 500 VIX Short-Term Futures ETN: Market Share 25.2%.
• CBOE: Volatility Index VIX ETN , Market Share 13%
• UVXY: ProShares Ultra VIX Short-Term Futures ETF, Market Share 5.6%.

These **competitors offer similar exposure to US volatility, and investors will likely compare them with CFO before investing.

Expense Ratio

The expense ratio stands at 0.90%. This fee covers the ETF's operating costs and is similar to other volatility-focused funds. Investors should factor in these costs when evaluating overall returns.

Investment approach and strategy

Strategy:

• CFO utilizes a volatility-weighted strategy within the large-cap US equities market by amplifying exposure to the more turbulent companies within in the S&P 500. this approach aims to generate amplified returns, aligning with higher risk.

Composition:

• The portfolio invests in equity securities whose performance is expected to correlate with that of the VictoryShares® US500 Enhanced Volatility Weighted Index
• Underlying holdings are primarily US large-cap equities selected based on their volatility characteristics,
• portfolio weighting adapts to changes in the volatility levels of individual components.

Key Points

• CFO offers magnified volatility-focused exposure within large-caps.

• It has shown promising performance in its first two years.

• Investors need to be comfortable with potentially high volatility.

Risks

Volatility Risk: CFO is inherently a riskier strategy compared to a traditional passively managed S&P 500 index fund due to its amplified exposure, possibly leading to significant swings in value.

Market Risks: As CFO focuses on a concentrated section of US large-caps, broader market movements influencing these companies could further impact the ETF's performance, including potential losses surpassing market averages.

Who Should Consider Investing?

CFO might appeal to:

• Investors with a high-risk tolerance who understand and accept volatility.

• Individuals seeking potential for magnified returns from larger US companies with higher volatility characteristics.

• Those seeking alternative strategies within the S&P 500 segment.

Evaluation of CFO's fundamentals using AI:

Fundamental Rating Based on AI: 7/10

CFO utilizes a unique volatility-weighted approach that has demonstrated potential, and the backing of the experienced Victory Capital Holding offers some confidence. However, its limited market share, relatively new track record compared to established competitors, and moderate liquidity leave room for improvement.

CFO's rating of 7/10 reflects this mixed assessment.

Resources and Disclaimers

Disclaimer: I am an AI language model and cannot offer financial advice. The above information is intended as a general overview and does not constitute a recommendation for investment. Please consult your financial advisor for guidance specific to your investment strategies and objectives.

Resources:

• Invesco ETF Website: https://www.invesco.co.uk/gb/etfs/cfos/invesco_us_500_enhanced_volatility_wted_ucits_etf_gbp_dist?productID=GB00BML32W31

• Yahoo Finance - CFO Analysis: https://finance.yahoo.com/quote/CFO/analysis/

• CFII Management LLC: https://www.cfim.io/