This ETF provides short exposure to the VIX Index by holding a combination of VIX futures contracts that are near to expiration. It does not seek to track the performance of the VIX Index or the S&P 500 and can be expected to perform very differently from the VIX Index over any time period. It targets a weighted average of time to expiry of the VIX futures contracts that is less than one month at all times (see: all the Inverse Volatility ETFs).
The actively managed product is unpopular an illiquid as depicted by its AUM of $11.1 million and average daily volume of under 8,000 shares.
State of Contango: A Win for VMIN
Investors should note that the ETF tracks the futures market and not the spot price of VIX. Therefore, it has to roll the contracts to maintain a notional exposure of time to expiration of less than one month. Hence, the fund is susceptible to roll yield.
Generally, roll yield is positive for the VIX index when the futures market is in backwardation and negative when the futures market is in contango. The VIX futures market is perpetually in a state of ‘contango’, a situation where near-term futures are cheaper than later-dated futures contracts. So, the index is selling low and buying high each time it rolls over its contract. This has led to the underperformance of the VIX futures index-based funds (read: The Key Things to Know When Trading Volatility with ETFs)