Volatility Divergence: Short Vol Rallies While Investors Hedge with Long Vol Flows

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Weekly Channel Summary

The Alternative ETF channel continues to showcase its growing relevance in diversified portfolios, currently housing 47 ETFs across 29 issuers with total Assets Under Management (AUM) of $10 billion. The channel maintained positive momentum this week, attracting approximately $250 million in net inflows. This builds upon a strong year-to-date trend, pushing total YTD inflows to $4.09 billion, while the rolling 1-year flow figure stands at $3.87 billion. The consistent capital appreciation suggests investors are actively seeking non-correlated sources of return amidst broader market volatility.

This Week’s Performance Leaders and Laggards

The volatility complex presented a stark dichotomy this week. “Volatility – Short” strategies significantly outperformed, posting a weekly return of 2.89%, while “Volatility – Long” strategies struggled, declining by -6.06%. This divergence highlights the persistent headwinds for long volatility exposure, which remains down over 36% YTD, contrasting with the more resilient performance of short volatility strategies. In the Absolute Return space, Managed Futures led the way with a 1.06% gain, decoupling from Event Driven and Multi-Strategy categories which both finished slightly negative.

Absolute Return Category Performance

Category WTD 1 Month 3 Month 6 Month YTD 1 Year
Absolute Return – Managed Futures 1.06% 2.74% 4.71% 10.31% 5.21% 5.23%
Absolute Return – Event Driven -0.14% 0.36% 2.09% 3.10% 8.89% 9.49%
Absolute Return – Multi-Strategy -0.84% -1.59% -0.34% 4.37% 2.56% 2.56%

Volatility Category Performance

Category WTD 1 Month 3 Month 6 Month YTD 1 Year
Alternative: Volatility – Short 2.89% 13.33% 5.14% 28.64% -2.15% 7.74%
Alternative: Volatility – Long -6.06% -24.83% -17.56% -43.38% -36.88% -46.70%

Top & Bottom 5 ETFs by Weekly Performance

The single best performer this week was the SVIX (-1x Short VIX Futures ETF), a short volatility fund, which rallied 5.80%. On the opposite end of the spectrum, leverage proved costly for volatility bulls, with the UVIX (2x Long VIX Futures ETF) and WZRD (Opportunistic Trader ETF) suffering the steepest declines of -11.83% and -11.72%, respectively.

Top Performers
Ticker Fund Name WTD Performance
SVIX -1x Short VIX Futures ETF 5.80%
SVXY ProShares Short VIX Short-Term Futures ETF 2.97%
ZVOL Volatility Premium Plus ETF 2.91%
AHLT American Beacon AHL Trend ETF 2.54%
CTA Simplify Managed Futures Strategy ETF 2.22%
Bottom Performers
UVIX 2x Long VIX Futures ETF -11.83%
WZRD Opportunistic Trader ETF -11.72%
UVXY ProShares Ultra VIX Short-Term Futures ETF -8.72%
VIXY ProShares VIX Short-Term Futures ETF -5.81%
VXX iPath Series B S&P 500 VIX Short-Term Futures ETN -5.78%

Analyzing the Weekly Flows

Flow activity for the week was decisively positive, with the channel absorbing $250 million. The “Absolute Return – Managed Futures” category was the primary beneficiary, attracting $198 million, indicating a strong investor preference for trend-following strategies. Notably, the “Alternative: Volatility – Long” category also saw inflows of $44 million, a contrarian signal given its poor weekly performance, likely driven by investors hedging against potential market turbulence. “Absolute Return” categories collectively gathered assets, reinforcing the demand for diversification.

Absolute Return Category Flows

Category Fund Count AUM 5 Day 30 Day 90 Day YTD 1 Year
Absolute Return – Managed Futures 15 $4.6B $198M $265M $731M $1,952M $2,028M
Absolute Return – Multi-Strategy 11 $1.9B $5M $4M $260M $311M $319M
Absolute Return – Event Driven 9 $0.5B $3M $4M $15M ($8M) ($9M)

Volatility Category Flows

Category Fund Count AUM 5 Day 30 Day 90 Day YTD 1 Year
Alternative: Volatility – Long 7 $1.8B $44M $194M ($412M) $2,345M $1,952M
Alternative: Volatility – Short 5 $1.2B SOM ($6M) ($74M) ($507M) ($423M)

Top & Bottom 5 ETFs by 5-Day Flow

The week’s undisputed flow leader was the FFUT (Fidelity Managed Futures ETF), which gathered an impressive $100 million. This single inflow accounted for a large portion of the entire category’s growth. Outflows were comparatively muted, with the SVIX (-1x Short VIX Futures ETF) seeing the largest redemption, shedding $5 million despite its strong performance.

Inflows
Ticker Fund Name 5-Day Flow
FFUT Fidelity Managed Futures ETF $100M
DBMF IMGP DBi Managed Futures Strategy ETF $48M
CTA Simplify Managed Futures Strategy ETF $48M
VIXY ProShares VIX Short-Term Futures ETF $24M
UVXY ProShares Ultra VIX Short-Term Futures ETF $15M
Outflows
SVIX -1x Short VIX Futures ETF ($5M)
KMLM KraneShares Mount Lucas Managed Futures Index Strategy ETF ($1M)
SPC CrossingBridge Pre-Merger SPAC ETF ($1M)
VYLD Inverse Vix Short-Term Futures ETN $0M
ARB AltShares Merger Arbitrage ETF $0M

Issuer League Table Update

IM and Simplify continue to dominate the Alternative ETF landscape, holding market shares of 20.49% and 18.94%, respectively. Fidelity made a significant move this week, topping the issuer flow charts with $100 million in net new assets, driven entirely by its Managed Futures product. Meanwhile, Volatility Shares experienced the largest net outflows among issuers, though the redemption amount was minimal at just $2 million.

Top 5 Issuers by AUM

Brand Fund Count AUM AUM Market Share
IM 1 $2.06B 20.49%
Simplify 3 $1.91B 18.94%
New York Life Investments 2 $1.10B 10.92%
ProShares 6 $1.03B 10.28%
iPath 2 $0.69B 6.85%

Top & Bottom 3 Issuers by 5-Day Flow

Inflows
Brand 5-Day Flow
Fidelity $100M
IM $48M
Simplify $48M
Outflows
Volatility Shares ($2M)
KraneShares ($1M)
CrossingBridge Funds ($1M)

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Disclosures

This material is for informational purposes only and should not be considered investment advice. All investments, including ETFs, involve risk, including the possible loss of principal. Investors should consider their investment objectives, risks, charges, and expenses carefully before investing.

This analysis was developed by the team at ETF Action. We leverage advanced AI tools to assist in the drafting and refinement of our content, based on our expert prompts, direction, and final review.