10-Q: VS Trust Reports Mixed Results for Q1 2025: UVIX Gains While SVIX Declines Amidst Volatile VIX Futures Market

VS Trust's Q1 2025 results show a divergence in performance between the 2x Long VIX Futures ETF (UVIX), which experienced gains, and the -1x Short VIX Futures ETF (SVIX), which faced declines, reflecting the inherent risks and volatility of VIX futures-based investments.

Summary

• VS Trust, comprising the -1x Short VIX Futures ETF (SVIX) and the 2x Long VIX Futures ETF (UVIX), released its financial results for the quarter ended March 31, 2025.
• SVIX reported a net decrease in net assets resulting from operations of $32.2 million, while UVIX saw a net increase of $81.0 million.
• SVIX's net asset value (NAV) per share decreased from $25.39 to $20.32, and UVIX's NAV per share increased from $33.93 to $37.07.
• The report details the funds' investments in VIX futures contracts, options, and short-term investments, along with associated risks and accounting policies.
• Both funds utilize leverage and are subject to risks including correlation and compounding risk, counterparty risk, and liquidity risk.
• The management fee for SVIX is 1.35% per annum of its average daily net assets, while for UVIX it is 1.65%.

Sentiment

Score: 5

Explanation: The sentiment is neutral, reflecting mixed results with UVIX performing well and SVIX underperforming. The document is factual and does not express a strong positive or negative outlook.

Positives

• UVIX experienced a significant net increase in net assets resulting from operations, amounting to $81.0 million.
• UVIX's NAV per share increased from $33.93 to $37.07, indicating positive performance for the fund.
• Both funds generate interest income from their investments, with SVIX earning $1,405,026 and UVIX earning $1,193,644.
• UVIX had net realized and unrealized gains on investments and futures contracts of $80.76 million.

Negatives

• SVIX experienced a net decrease in net assets resulting from operations of $32.2 million.
• SVIX's NAV per share decreased from $25.39 to $20.32, reflecting negative performance.
• SVIX had net realized and unrealized losses on investments and futures contracts of $32.55 million.

Risks

• The funds are subject to correlation and compounding risk, which can cause their performance to deviate from their stated objectives over periods longer than a single day.
• Counterparty risk exists due to the use of derivatives, particularly in OTC markets.
• Liquidity risk can impact the ability to liquidate financial instruments at desired prices.
• The funds utilize leverage, increasing the risk of total loss of investment.
• Contango and backwardation in futures markets can impact performance during rolling of contracts.
• Regulatory changes and market disruptions can adversely affect the funds' operations and performance.
• Natural disasters and epidemics can disrupt economies and markets, leading to increased volatility and losses.

Future Outlook

The discussion and analysis may contain statements that relate to future events or future performance, but the Trust, Sponsor, Trustee, or Administrator do not assume responsibility for the accuracy or completeness of any forward-looking statements and are under no duty to update them.

Industry Context

These funds operate in the niche market of volatility-linked exchange-traded products, which are known for their complexity and high risk. The performance of SVIX and UVIX is directly tied to the VIX futures market, which is influenced by broader market sentiment and economic conditions. These products are designed for sophisticated investors with a high-risk tolerance and a deep understanding of volatility dynamics.

Comparison to Industry Standards

• Comparing VS Trust's funds to similar volatility-linked products, such as those offered by ProShares (e.g., SVXY, UVXY) and VelocityShares (no longer active but previously offered similar products), reveals that the daily rebalancing and leveraged nature of these ETFs lead to significant tracking differences over longer periods.
• For example, while a traditional index fund aims to closely mirror the performance of its underlying index, leveraged and inverse volatility ETFs like SVIX and UVIX can deviate substantially due to the effects of compounding, especially during volatile periods.
• Industry benchmarks for assessing the performance of these funds include the daily returns of the underlying VIX futures indices, but it's crucial to note that these funds are not designed for long-term holding and their performance should be evaluated on a daily basis.
• The expense ratios of VS Trust's funds (1.35% for SVIX and 1.65% for UVIX) are generally in line with other specialized ETFs in the volatility space, reflecting the higher costs associated with managing and rebalancing leveraged and inverse products.

Stakeholder Impact

• Shareholders of UVIX may experience positive returns due to the fund's increase in net assets and NAV per share.
• Shareholders of SVIX may experience negative returns due to the fund's decrease in net assets and NAV per share.
• Authorized Participants are affected by the transaction fees associated with the creation and redemption of Creation Units.
• The Sponsor receives management fees based on the funds' average daily net assets.

Key Dates

Keywords

VIX futures, UVIX, SVIX, Volatility Shares, Leveraged ETF, Inverse ETF, Financial results, Net asset value, Derivatives, Commodity pool