New ETF Capitalizes On Volatility

May 14, 2020

Today, Little Harbor Advisors rolled out its second ETF. The LHA Market State Alpha Seeker ETF (MSVX) invests in a variety of S&P 500- and VIX-related vehicles via long or short positions with the goal of achieving positive returns in all market environments that are uncorrelated to those of equity and fixed income.

MSVX comes with an expense ratio of 1.16% and lists on Cboe Global Markets, parent company of ETF.com.

The fund is managed by brothers Michael and Matthew Thompson of Thompson Capital Management, an LHA subsidiary. They developed the strategy, which relies on quantitative models and has previously been available in non-ETF wrappers like separately managed accounts.

“We were looking for something more durable that would have a chance to make money in more market environments and not rely solely upon the stock market rising or the stock market falling to make money,” the firm said of the strategy.

How It Works
The fund basically looks to play the volatility of the S&P 500 Index by determining whether the data suggests taking long or short positions in S&P 500 and VIX vehicles, whether they be ETFs or derivatives.

Speaking broadly, the fund goes long volatility when near-term volatility is expected to be higher than long-term volatility, and it takes short volatility positions when near-term volatility is expected to be lower than long-term volatility, according to the prospectus.

Thompson Capital uses its proprietary VIX Dashboard to evaluate the volatility environment on a daily basis to determine the direction and strength of U.S. stock volatility and whether the fund should hold long or short positions in equity or volatility.

Ultimately, MSVX serves as a source of diversification for a portfolio, and Michael Thompson says that MSVX is best described as a liquid alts strategy that might warrant a 10-20% weight in an investor portfolio.

“The objective of the fund is to produce uncorrelated returns across the market cycle,” Matthew Thompson said..

Little Harbor Advisors previously launched the LHA Market State U.S. Tactical ETF (MSUS) in 2018.

Contact Heather Bell at [email protected]

Find your next ETF

Reset All