Smart Vol Strategy Details
The Smart Vol Strategy is a program developed and managed by our affiliated Investment Advisor partner Invest in Vol (IIV). www.Investinvol.com
IIV's Program primarily trades the VXX ETN and VXX Options and the strategy is a Long/Short Vol strategy (meaning it can profit from volatility going up or down). Invest In Vol actively manages the Smart Vol Strategy and can/will shift market exposure intraday if needed. The goal is to benefit from periods of both calm and crisis.
The objective of Granite's implementation of the Smart Vol Strategy is to seamlessly blend it with Granite's Keystone Strategy and enable both Strategies to enhance and take advantage of each other's strengths.
Below is a snapshot of Smart Vol's performance from Jan 2016 to March 2021. As you can see, Smart Vol has periods of incredible performance (like 2016 and 2020) along with periods of flat performance (like March 2018 to Nov 2019).
During Smart Vol's flat performance periods, Granite's Keystone Strategy can produce consistent returns to help maintain steady overall portfolio performance. During periods of extreme volatility (like during the pandemic crash of March 2020), Smart Vol can produce exceptional returns to help mitigate some of the Keystone Strategy's volatility exposure.
This is why the combination of the Keystone Strategy and the Smart Vol Strategy is so powerful.
For clients who wish to participate in the Smart Vol Strategy, Granite will establish a separate sub-account for the client with Invest In Vol and then redirect a small portion of their Granite funds to be managed by Invest In Vol. Granite will continue to oversee and maintain overall control of all client funds, but Invest In Vol is in charge of trading the client's funds deposited in their Program.
It should be noted that the Smart Vol Strategy is not a substitute for a Black Swan Hedge. Since the Smart Vol Strategy is often short volatility, it does run the risk of being on the wrong side of the market during an overnight Black Swan Event.
That said, the short volatility positions Smart Vol holds do have limited downside exposure (so the risk is limited), but in a true Black Swan Event, if Smart Vol happened to be short volatility and the markets were closed, its positions would be adversely affected in a significant way. On the contrary, if a Black Swan Event happens while the markets are open, the program managers at Invest In Vol would immediately flip to long volatility and take full advantage of the volatility spike.