New VIX-Hedged ETF Takes Complex Path to Portfolio Protection
NEW YORK ( TheStreet) -- On the heels of the First Trust CBOE S&P 500 VIX Tail Hedge ETF (VIXH) launch a few months ago, PowerShares is listing a competing VIX-hedged fund with the PowerShares S&P 500 Downside Hedged ETF (PHDG).
The funds are similar in that they use the CBOE Volatility Index, commonly known as the VIX, to try to protect against large declines in the market.
But the specific ways in which they do this are very different. VIXH continuously maintains a 1% position in VIX front-month calls. PHDG, on the other hand, bills itself as actively managed to own various combinations of equities via the S&P 500, cash and VIX futures.
More specifically, PHDG uses a rules-based methodology that appears to be very complicated.
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