To me, the fact that VIXH is not constantly hedged is a significant drawback bordering on absurdity. I am not a career statistician, but I think this makes VIXH vulnerable to future black swan events rather than protecting investors from them.
Additionally, a black swan event is by definition a "surprise" event. To claim that the element of surprise, and the associated portfolio impact, are nonexistent much of the time based on only five observations over 25 years tends to stretch statistical credibility.
Although the official expense ratio is 0.60%, the actual cost to shareholders is likely to be much higher. The fund may have to sell a portion of each of its 500 stocks every month in order to free up cash for additional VIX call options. It also intends to reinvest every dividend received on those 500 stocks.The transaction costs (brokerage fees and slippage) on up to 6,000 transactions per year (much more if you include dividend reinvestments) could have a severe performance impact. Hopefully, the management team has considered the cost of implementing this strategy with individual stocks versus using Vanguard S&P 500 (VOO) for the equity exposure. Potential investors of VIXH should compare to
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV