"IVOL might be an option for some"

Old_Joe

In the "Alternatives to Low Yielding Bond Funds"" thread @rforno said

IVOL might be an option for some. I'm using that as my cash alternative at the moment.

@Mark then asked

What's the catch? IVOL is roughly 90% made up of another ETF SCHP.

SCHP is a Schwab US TIPS ETF, and IVOL seems to be something called "Quadratic Interest Rate Volatility and Inflation Hedge ETF "

No one has really picked up on discussing either of these funds, and I'd really appreciate input from anyone having knowledge in this area. With respect to the current market conditions, would this be a reasonable time to consider TIPS vehicles?

Thanks to anyone who can help on this.

davidrmoran

I am looking hard at TIPZ, yes

rforno

Per their material: "IVOL is a first-of-its-kind ETF which is designed to hedge the risk of an increase in fixed income volatility and/or an increase in inflation expectations. It also seeks to profit from a steepening of the yield curve, whether that occurs via rising long-term interest rates or falling short term interest rates, which are historically associated with large equity market declines....What makes IVOL unique is that it is long interest rate volatility via its access to the OTC fixed income options market. No other active or passive ETF has provided its investors access to this market before."

I think the 'secret sauce' is their options stuff and access to OTC stuff that we don't have - but you could probablt replicate much of fairly easily. That said, I suspect the majority of its performance is probably from SCHP and you could stick with SCHP if you wanted to.

Bogleheads has a lengthy thread on it, which is where I stumbled across it and decided to take a flyer on -- so far it's done fine. https://www.bogleheads.org/forum/viewtopic.php?t=324165

AndyJ

YTD, IVOL is up 14.6% vs. SCHP 10.6%, per the M* $10k growth chart function. The March drawdown was far less. Looks to me like the volatility/steepener addon to a 'normal' TIPS fund is pretty significant.

One angle I really don't get (and I saw a long interview with the manager on the Hedgeye website, where it wasn't addressed) is exactly where that 3%+ distribution yield is coming from.

I've had a small test position for a while, and am leaning toward keeping it in the port.

Derf

@rforno : Nice catch , when did you make your purchase ?
Stay Safe, Derf

rforno

Late Aug was my initial purchase if memory serves...

Derf said:

@rforno : Nice catch , when did you make your purchase ?
Stay Safe, Derf

Old_Joe

Thanks to all who have commented on this.

OJ