​Daily Wrap – Funds Warn On Vol Expansion; Manager Eyes RV Strategy

The market is entering into a new vol regime with events in August surrounding China a mere dress rehearsal of things to come, according to portfolio managers at volatility funds. In this special report, we spoke with senior officials from 36 South, Artemis Capital Management and Dominicé&Co on current flow, the potential drivers of an expansion in volatilities and why institutional investors are increasingly allocating to volatility funds. Also in the U.S., long S&P 500 volatility via Chicago Board Options Exchange Volatility Index futures, options or variance swaps, or relative value trades that pit long S&P vol against short Eurostoxx 50 volatility should allow for single digit returns, while partially protecting downside if volatility moves higher due to a potential interest rate hike, according to one absolute return fund manager.