Episode summary
IVOL ETF: Hedging Inflation, Interest Rate Volatility & Yield Curve Risk
ETF Spotlight
· · Hosts: Jeffrey Sherman · Guests: Nancy Davis
Summary
IVOL is presented as a fund built to solve two problems Nancy Davis sees in traditional TIPS: they only reset with CPI, and they leave investors exposed to duration risk. She says IVOL combines TIPS with options and a rates-market component so investors can access a broader inflation measure and potentially benefit from rising inflation expectations, rising volatility, or market stress.
Davis argues investors are overthinking tariffs and inflation as a short-term trade. In her view, inflation is a permanent part of every household and portfolio, so the bigger issue is owning something that can help offset a higher cost of living rather than trying to time one data print or one policy headline.
She also frames IVOL as a hedge for fixed income, not equity volatility. The fund is designed to complement core bond allocations such as AGG by targeting interest-rate volatility, the yield curve, and option structures tied to mortgages and swaps. Davis says the current setup is notable because the SOFR curve has normalized after years of inversion, creating a potentially attractive environment for the strategy.
Key takeaways
- Nancy Davis says IVOL was built to address two flaws in TIPS: CPI-only inflation exposure and long-duration sensitivity.
- Davis argues investors should treat inflation as a persistent balance-sheet risk, not a short-term trade around tariffs or Fed headlines.
- The fund targets interest-rate volatility, which Davis says matters more than equity volatility for bond investors because mortgages embed short optionality.
- Davis says IVOL complements AGG by adding inflation protection and low-correlation rate exposure rather than replacing core bonds.
- She says the SOFR curve has crossed back into positive territory in 2025 after three years of inversion, which she sees as supportive for the strategy.
Notable quotes
“we really designed IVOL as TIPS plus solutions to kind of fix the two big issues that exist with TIPS”
“we add another way of accessing inflation, which is a rates market. And it's very timely because the rates market is one of the biggest markets in the world”
“I think people are overthinking it and they're thinking about inflation as almost a trade”
“it's not equity vol that people should really be worried about. It's actually fixed income volatility”
“currently right now today, that spread is 20 basis points, and it just crossed positive territory in 2025”
How the episode opens
Past performance is no guarantee of future results. Content is offered for information purposes only, unless stated otherwise, any and all individuals participating in the video are third parties that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body. Unless stated otherwise, the views or opinions expressed may not reflect those of Seeking Alpha as a whole.
The accuracy and completeness of content shared cannot be guaranteed. Seeking Alpha does not take account of your objectives or financial situation, and does not offer any personalized investment advice. Seeking Alpha is not a licensed securities dealer, broker, US investment advisor, or investment bank.
Hey everyone, Daniel Snyder from Seeking Alpha. Thanks for tuning in to this episode where we get to sit down with Nancy Davis. She is the Founder and Portfolio Manager at Quadratic Capital Management.
Nancy, thanks for jumping on. I can't wait to dive into your ETF, the I-V-O-L, IVOL. There's so much to dive in here and what goes on in the volatility space and we can talk about inflation and let's talk about the VIX Index.
But before we dive into all that, IVOL, how did it come into existence? What's the strategy? How did it begin?
Well, when I started my career at Goldman Sachs, was right when the US Treasury invented the TIPS market, the Treasury Inflation Protected Securities market. I always thought that was not a great product. I thought it was more in name only.
And so we really designed IVOL as TIPS plus solutions to kind of fix the two big issues that exist with TIPS, which are a, they are treasury bonds, but they only reset with the consumer price index. Think about in the equity world, nobody would use one index to capture the equity markets, capturing inflation markets with one index, especially when we've heard from the Fed for years that they don't think the CPI is the only way to measure inflation is just not sufficient.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- inflation hedging
- interest rate volatility
- yield curve risk
- bond benchmarks
- c los
Companies and tickers mentioned
- Quadratic Capital Management
Watch the episode
Watch “IVOL ETF: Hedging Inflation, Interest Rate Volatility & Yield Curve Risk” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
More from ETF Spotlight
-
CGDV Fund: Misleading Name, Exceptional Performance -
Extreme Tech Sentiment: Put Buying Spike Points to XLK Rally -
BIZD vs PBDC ETF: High-Yield Income from Top BDCs -
The Alpha Analyst: STCE ETF: AI-Driven Strategy For Crypto And Fintech Exposure -
Harrison Schwartz: Why PPLT Is My Top Platinum ETF Pick Through 2030 -
Covered Call ETFs vs. Dividend Growth: Gary Gambino Explains DGRO and DIVO
ETF Spotlight, this episode and its artwork belong to Zacks Investment Research. Octagon is not affiliated with the show; this page is an independent summary.
