Jefferies Jacks Up Price Of Proposed VIX ETF

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Jefferies Asset Management, the Stamford, Conn.-based money management firm known for its commodity exchange-traded funds, almost doubled the price of its proposed VIX volatility futures ETF to match the prices on two competing ETNs that also give investors exposure to the so-called fear index that spikes when the S&P 500 Index plunges.

The proposed Jefferies S&P 500 VIX Short-Term Futures ETF (NYSEArca:VIXX) now has an annual management fee of 0.89 percent of assets, according to the company's updated filing with the Securities and Exchange Commission. Initially, Jefferies said it was planning on a 0.49 percent fee. A company official declined to disclose when the fund might launch, saying the registration process of VIXX remains under SEC "quiet period" rules.

The two ETNs that already track the VIX index and also charge 0.89 percent are the iPath S&P 500 VIX Short-Term Futures ETN (NYSEArca:VXX) and the iPath S&P 500 VIX Mid-Term Futures ETN (NYSEArca:VXZ). The annual management fee may actually be of secondary importance to investors who typically use such VIX-linked products as short-term trading instruments.

"VIXX" will be the first ETF tied to the VIX index.

Competing Strategies

The underlying VIX index is designed to estimate expected volatility in large-cap U.S. stocks over 30 days in the future by averaging the weighted prices of certain put and call options on the S&P 500 Index. Because the Volatility Index may increase in times of uncertainty, it's commonly known as the "fear gauge" of the broad U.S. equities market. The index historically has had negative correlations to the S&P 500 Index, the company's initial filing said.

Jefferies' proposed ETF, "VIXX," will take long positions in futures contracts underlying the VIX Futures Index and aims to track that index's changes over time, whether positive or negative, according to the company's initial filing. The ETF won't be designed to outperform the VIX index.

The competing ETNs have slightly different strategies. "VXX" provides exposure to first- and second-month contracts tied to the underlying index, while "VXZ" invests in fourth-, fifth-, sixth- and seventh-month VIX futures contracts.

Jefferies' existing ETFs include the Jefferies | TR/J CRB Global Commodity Equity Index Fund (NYSEArca:CRBQ), the Jefferies | TR/J CRB Global Industrial Metals Equity Index Fund (NYSEArca:CRBI), and the Jefferies | TR/J CRB Wildcatters Exploration & Production Equity ETF (NYSEArca:WCAT).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , ETFs
Referenced Symbols: CRBI , CRBQ , VXX , VXZ , WCAT

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