A relatively new ETF with a funny name has posted massive returns since it launched 18 months ago. The question is, has this ETF broken the code for great ongoing returns, or should investors be wary?
Let’s look at how the -1x Short VIX Mid-Term Futures Strategy ETF (ZIVB) functions and review the investment results.
The ZIVB goal is to match the daily investment results of the S&P 500 VIX Mid-Term Futures Inverse Daily Index. The index measures inverse the return of a daily rolling long position in the fourth, fifth, sixth, and seventh-month VIX futures contract.
The longer-dated short futures contracts will be more stable than what happens with spot VIXX. The natural path for VIX is to decline as you move towards the shorter end of the term structure. As an inverse VIX tracking ETF, ZIVB should (and has) generated positive returns.
The ZIVB website states that the ETF has a current distribution rate of 25.52%. The yield comes from level monthly dividend payments of $0.485 per share. It appears that this is a managed dividend policy payout, sharing portfolio profits with investors throughout the year rather than paying a massive dividend at the end of the year.
ZIVB launched on April 19, 2023, and started paying dividends in January 2024.
Since its inception, the ETF has returned 70.54% (as of August 28). ZIVB appears to offer a great dividend yield and a great total return.
Note that when VIX spiked during the early August “Flash Crash” the ZIVB share price took a big hit, dropping by 30% in just a few days. The price recovered as VIX normalized, but the steep drop shows the dangers of an inverse VIX strategy.
The S&P Dow Jones website provides ten years of results for the above-listed VIX Futures Inverse Daily Index.
As you can see, the Index performs poorly in bear market years (2018, 2020, 2022) and does great during bull markets.
This is an ETF that you may want to buy as the stock market bottoms out a bear market or when short-term disruptions generate a VIX spike. But don’t let recent results convince you that the returns can continue.
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