Fixed Income

IVOL Quarterly Update

By Nancy Davis CIO of Quadratic Capital

As nations make varying degrees of progress against the pandemic, we continue in uncharted waters. The novel coronavirus has cost thousands of lives and crippled economies around the world. Yet many financial markets have recovered strongly in the second quarter of 2020. 

The S&P closed the quarter at 3100, an impressive recovery from the previous quarter. After losing 20% in Q1, the index recovered in Q2, with +20% return. It was the best quarterly performance in over two decades.

But the bond market tells a different story. Treasury yields remain close to all-time lows, with the 2 Year paying investors 15 bps and the 10 Year yielding just 60 bps.

After a strong performance during the first quarter selloff, IVOL has continued to perform well as the markets recovered during the second quarter. Many investments that helped mitigate losses during the selloff had a rough time as the markets rallied. IVOL investors did not experience such an outcome, with IVOL turning in positive returns in both environments. Please see specific performance data in the table below.

IVOL’s Performance

The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than their original cost and current performance may be lower or higher than the performance quoted. For performance data current to the most recent month end, please visit www.ivoletf.com.

In addition to IVOL’s positive performances during two very different quarters, investors may note IVOL’s historical correlations to common asset classes, and it’s potential as a portfolio diversifier. As the table below shows, IVOL has had very low correlations with common asset classes. In this environment, many investors are looking to add holdings that reduce the volatility of their portfolios. Investments with such low correlation coefficients can be very attractive to such investors.

IVOL’s correlation to other assets

Daily correlation from 5/14/19 to 6/30/20. Source: Bloomberg and Quadratic calculations.

The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than their original cost and current performance may be lower or higher than the performance quoted. For performance data current to the most recent month end, please visit www.ivoletf.com.