IVOL

The Quadratic Interest Rate Volatility and Inflation Hedge ETF

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Investment Strategy:

IVOL is a first-of-its-kind ETF which is designed to hedge the risk of an increase in fixed income volatility and/or an increase in inflation expectations. It also seeks to profit from a steepening of the yield curve, whether that occurs via rising long-term interest rates or falling short term interest rates, which are historically associated with large equity market declines.

What makes IVOL unique is that it is long interest rate volatility via its access to the OTC fixed income options market. No other active or passive ETF has provided its investors access to this market before. This access is the key to IVOL’s many applications and allows it to potentially benefit from normalization of the yield curve while seeking to provide inflation-protection.

IVOL also provides inflation-protected income.

About the IVOL ETF:

  • Expertise in options and volatility markets: IVOL is managed by Quadratic Capital Management, an innovative alternative asset management firm founded in 2013 by Nancy Davis. The firm’s expertise in the options and volatility markets allow us to construct portfolios that seek to mitigate the downside risk of the strategy while maintaining upside potential.
  • Attractive risk/reward profile: IVOL seeks to protect purchasing power, mitigate inflation risk, profit from an increase in volatility and a steepening of the yield curve, and provide inflation-protected income. At the same time, the fund looks to provide investors with access to the OTC interest rate options market – a market largely not previously available to individual investors – to provide structured solutions that offer an attractive risk/reward profile.
  • Allows for innovative strategies: We believe the OTC Swap/Options market offers an attractive combination of inefficiency and liquidity which allows for the creation of innovative strategies previously only largely available to sophisticated institutional investors. The use of options can provide the opportunity for products to be constructed with known downside risk and strong upside return potential

Fund Details

Data as of 11/27/2020
TickerIVOL
Primary Exchange NYSE
CUSIP500767736
ISINUS5007677363
Net Assets$821,020,219
Total Annual Fund Operating Expense (Gross) 1.04%
Total Annual Fund Operating Expense (Net) 0.99%*
Inception Date5/13/2019
Distribution FrequencyMonthly

Fund Documents

Daily Performance

Data as of 11/27/2020
Premium Discount Chart
NAV
Net Asset Value$27.28 
Daily Change -0.08%
Price
Closing Price $27.32 
Daily Change0.04%
Curve Spread DV01
Data as of 11/27/2020		 $0.0271
Curve Spread DV01 is the sensitivity of the fund’s OTC options to a 0.01% change in the steepness of the US interest rate curve.

Performance History

Distributions
Cumulative %
Data as of: 10/31/2020		 Fund NAV Closing Price Index
1 Month0.74% 0.30% -0.65%
3 Month2.40% 2.36% 0.07%
6 Month6.20% 5.50% 3.82%
Since Inception15.24% 15.31% 13.41%
Avg Annualized %
Data as of month end: 10/31/2020		 Fund NAV Closing PriceIndex
1 Year12.87% 12.63% 9.09%
Since Inception10.17% 10.21% 8.93%
Avg Annualized %
Data as of quarter end: 09/30/2020		 Fund NAV Closing Price Index
1 Year12.02% 12.05% 10.08%
Since Inception10.22% 10.62% 10.01%
Growth of $10,000
Data as of 11/27/2020

*Fee waivers are contractual and in effect until August 2021

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.

The Growth of $10,000 chart reflects an initial investment of $10,000 on the day prior to the selected time period and assumes reinvestment of dividends and capital gains. For the growth of $10,000 chart since inception, the initial investment of $10,000 is instead made on the inception date of the Fund. Fund expenses, including management fees and other expenses were deducted. The growth of a $10,000 investment in the fund is hypothetical and for illustration purposes only.

IVOL Key Metrics

Data as of 10/31/2020
30-day SEC Yield0.00%
Unsubsidized 30-day SEC Yield 0.00%

Top 10 Holdings

Data as of 11/27/2020
Full Holdings .CSV
RankCompany Name% of Net AssetsTickerShares HeldMarket Value($)
1
SCHWAB U.S. TIPS ETF
87.63%SCHP11,706,522719,482,842
2
CASH
8.23%–67,600,03967,600,039
3
USD CMS 2-10 06/15/22 75E
0.91%–440,0007,505,376
4
USD CMS 2-10 12/14/21 53
0.77%–250,0006,289,267
5
USD CMS 2-10 03/16/22 46E
0.69%–180,0005,660,055
6
USD CMS 2-10 09/15/21 51
0.58%–195,0004,738,056
7
USD CMS 2-10 01/27/22 33
0.49%–100,0004,022,733
8
USD CMS 2-10 11/01/21 43
0.45%–120,0003,716,364
9
USD CMS 2-10 06/28/21 39
0.24%–65,0002,005,487

Holdings are subject to change.

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©2020 Krane Funds Advisors, LLC
280 Park Avenue, 32nd Floor, New York, NY 10017

Carefully consider the Funds' investment objectives, risk factors, charges and expenses before investing. This and additional information can be found in the Funds' full & summary prospectus, which may be obtained here: KLCD, KSCD, IVOL, KDFI, KRBN, KVLE. Read the prospectus carefully before investing. Please note these links also contain the fund's current top ten holdings.

Risk Disclosures:

Investing involves risk, including possible loss of principal. There can be no assurance that a Fund will achieve its stated objectives.

The Funds may invest in derivatives, which are often more volatile than other investments and may magnify the Funds’ gains or losses. The Funds are non-diversified.

KSCD and KVLE invest in small-capitalization companies. In addition to the normal risks associated with investing, investments in smaller companies typically exhibit higher volatility.

KSCD and KVLE are subject to liquidity risk, meaning that certain investments may become difficult to purchase or sell at a reasonable time and price. If a transaction for these securities is large, it may not be possible to initiate which may cause the Fund to suffer losses.

There is no guarantee that issuers of the stocks held by KSCD, KLCD, and KVLE will declare dividends in the future or that, if declared, such dividends will remain at current levels or increase over time.

IVOL’s derivatives investments involve risks. The derivatives used by IVOL may give rise to a form of leverage. Leverage magnifies the potential for gain and the risk of loss. The prices of options can be highly volatile and the use of options can lower total returns. OTC options generally have more flexible terms negotiated between the buyer and the seller. As a result, such instruments generally are subject to greater credit risk and counterparty risk. OTC instruments also may be subject to greater liquidity risk. Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer term debt securities. IVOL seeks to mitigate the risk associated with the potential impact of a steepening swap curve (“curve risk”) on the performance of U.S. government bonds by investing in products designed to appreciate in value when the swap curve steepens. IVOL’s use of such instruments is intended to mitigate the curve risk and is not intended to mitigate credit risk, or non-curve interest rate risk. There is no guarantee that IVOL’s investments will completely eliminate the curve or inflation risk of the long positions in U.S. government bonds. In addition, when the swap curve flattens, the Fund’s investments will generally underperform a portfolio comprised solely of the U.S. government bonds. In a flattening curve environment, IVOL’s hedging strategy could result in disproportionately larger losses in IVOL’s options as compared to gains or losses in the U.S. government bond positions attributable to interest rate changes. IVOL’s exposure to derivatives tied to interest rates subjects IVOL to greater volatility than investments in traditional securities, such as stocks and bonds. Investing in derivatives tied to interest rates, including through options tied to the shape of the swap curve, is speculative and can be extremely volatile. IVOL is non-diversified.

There are risks involved with investing in options including total loss of principal. Options investing is not suitable for all investors. This fund utilizes sophisticated options strategies which may not be suitable for all investors. For a more comprehensive discussion of the risks involved in options investing, please review Characterizations and Risks of Standardized Options available at www.theocc.com/about/publications/character-risks.jsp or contact the Options Clearing Corporation directly at 1 N. Wacker Dr., Suite 500, Chicago, IL 60606. (1-888-678-4667)

Based on Bloomberg reporting as of 5/8/2019, IVOL is the only US derivative based ETF to utilize OTC interest rate volatility options

KDFI can invest in bonds generally and high-yield bonds specifically. Bonds and bond funds are subject to interest rate risk and will decline in value as interest rates rise. High yield bonds involve greater risks of default or downgrade and are more volatile than investment grade securities, due to the speculative nature of their investments.

KRBN relies on the existence of cap and trade regimes. There is no assurance that cap and trade regimes will continue to exist, or that they will prove to be an effective method of reduction in GHG emissions. Changes in U.S. law and related regulations may impact how the way the Fund operates, increase Fund costs and/or change the competitive landscape. Funds may underperform other similar funds that do not consider conscious company/ESG guidelines when making investment decisions.

KRBN invests through a subsidiary, and is indirectly exposed to the risks associated with the Subsidiary’s investments. Since the Subsidiary is organized under the law of the Cayman Islands and is not registered with the SEC under the Investment Company Act of 1940, as such the Fund will not receive all of the protections offered to shareholders of registered investment companies.

The value of a commodity-linked derivative investment typically is based upon the price movements of a physical commodity and may be affected by changes in overall market movements, volatility of the Index, changes in interest rates, or factors affecting a particular industry or commodity.

KRBN and the Fund's Subsidiary will be considered commodity pools upon commencement of operations, and each will be subject to regulation under the Commodity Exchange Act and CFTC rules. Commodity pools are subject to additional laws, regulations and enforcement policies, which may increase compliance costs and may affect the operations and performance of the Fund and the Subsidiary. Futures and other contracts may have to be liquidated at disadvantageous times or prices to prevent the Fund from exceeding any applicable position limits established by the CFTC. Additionally, the Fund’s investments are subject to liquidity risk, which exists when an investment is or becomes difficult to purchase or sell at a reasonable time and price.

Investments in non-U.S. instruments may involve risk of loss due to foreign currency fluctuations and political or economic instability. The Fund’s assets are expected to be concentrated in an industry or group of industries to the extent that the Index concentrates in a particular industry or group of industries. KRBN is non-diversified.

ETF shares are not redeemable with the issuing fund other than in large Creation Unit aggregations. Instead, investors must buy or sell ETF Shares in the secondary market with the assistance of a stockbroker. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling. The NAV of the Fund’s shares is calculated each day the national securities exchanges are open for trading as of the close of regular trading on the New York Stock Exchange (“NYSE”), normally 4:00 p.m. Eastern time (the “NAV Calculation Time”). Shares are bought and sold at market price (closing price) not NAV. Market price returns are based on the midpoint of the bid/ask spread at 4:00 pm Eastern Time (when NAV is normally determined).

The KFA Funds ETFs are distributed by SEI Investments Distribution Company (SIDCO), 1 Freedom Valley Drive, Oaks, PA 19456, which is not affiliated with Krane Funds Advisors, LLC, the Investment Adviser for the Funds. For KVLE, SIDCO is also not affiliated with Lee Capital Management, the sub-advisor to the Fund, or Value Line.

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