Active from 15 June, the Powershares S&P 500 VEQTOR UCITS ETF will provide long-only exposure to the S&P 500 and S&P VIX Short-Term Futures indices, as well as cash positions, tracking the S&P 500 Dynamic VEQTOR Index.
Explaining the decision to launch the fund, Invesco cited an increasing number of investors seeking to preserve their capital in light of the 2008 financial crisis remaining a prominent memory.
This inclination is a key characteristic of the ETF’s chosen index, which features a stop-loss mechanism – if index losses reach 2% over five business days, the entire fund allocation shifts into cash or cash equivalents until losses drop back below the maximum threshold.
The fund seeks to achieve this outcome via the negative correlation of the S&P 500 VIX Short-Term Futures Index against the S&P 500 Index, thereby alleviating the risk between the US equity space and market volatility.
While the ETF will normally hold a minimum exposure to the VIX index, in times of increased market volatility there is scope for this allocation to reach as high as 40% of the portfolio.
Bryon Lake, head of Invesco PowerShares EMEA, outlined the importance of mirroring the characteristics of liquid alternatives to the fund’s goal of generating returns alongside minimising downside risk.
“Capital preservation has become an increasingly important and relevant component of investing,” he said.
“We don’t need to look far back to remember how quickly and unexpectedly market volatility can strike in today’s market environment. Investors are looking for intuitive solutions which allow them to refine their exposure in key markets, like US equities.”
Currently available on the London Stock Exchange and Irish Stock Exchange, the fund will also be floated on the Deutsche Börse Index and Borsa Italiana from 19 June, while the launch date of the SIX Swiss Exchange version is yet to be confirmed.
