Denver-based ALPS Fund Services has launched two large-cap exchange-traded fund index funds that will invest in an index of three ETFS that track the S&P 500 (SPX) and two volatility indices pegged off the S&P 500 Market Volatility Index (VIX), according to a filing with the Securities and Exchange Commission.
The new ALPS funds—the VelocityShares Tail Risk Hedged Large Cap ETF and the VelocityShares Volatility Hedged Large Cap ETF—will invest in the underlying indexes, the VelocityShares Tail Risk Hedged Large Cap Index (Tail Risk Index) and VelocityShares Volatility Hedged Large Cap Index (Hedged Index), respectively. Each underlying index consists of an 85% allocation in the underlying large-cap ETFs and a 15% allocation to the underlying volatility ETFs.
Both indices reflect exposure three underlying index ETFs which track the Standard & Poor’s 500—the S&P 500 ETF Trust (SPY); the S&P 500 ETF (VOO); and the S&P 500 Index Fund/U.S. (IVV); and two underlying volatility ETFs, the Ultra VIX Short-Term Futures ETF (UVXY) and the Short VIX Short-Term Futures ETF (SVXY).
Both funds will establish positions by purchasing shares of the three underlying large-cap ETFs and by utilizing one or more swaps or other instruments designed to provide exposure to the underlying volatility ETFs, according to the SEC filing. The funds may also invest directly in shares of the underlying volatility ETFs.
ALPS Advisors, which had $4.76 billion in assets under management billion as of the end of last year, will act as each fund’s advisor. Michael Akins, ALPS Adviors’ vice president of Product Risk Management & Portfolio Analytics and head of the Index Management team, will be portfolio manager of the new funds.
The annual expense ratios of the new funds were not listed in the SEC filing. A phone call for comment to ALPS Funds was not returned by press time.