Indices: Barclays launches vol indices

"The increase of correlation across asset classes in recent months has made it difficult for investors to find negatively correlated assets" Andrew Kaufmann, Barcap

Although not strictly accurate in its claim that it is the first bank to launch such a product, Barclays Capital can claim some bragging rights with its decision to launch a range of investable foreign exchange volatility indices. The bank says the products will facilitate access to vol and enable investors to underpin alpha and diversification strategies. Asset class

Barcap points out that the concept of regarding vol as an asset in its own right has gained credence over the past few years and that it has become increasingly used as a barometer to gauge market sentiment, particularly in more recent months. The bank’s suite of FX vol products will initially comprise three indices: BetaVol; SmartBetaVol and AphaVol. The three products have different underlying systematic strategies that are designed to meet varying objectives. They consist of a portfolio of long and short vol positions. The indices are rebalanced each month in response to changing market conditions.

Barcap says FX’s relatively low correlation to other assets makes the products extremely useful as diversification tools.