The London-based exchange-traded product provider Source and Japanese investment banking giant Nomura have launched a new volatility-linked exchange-traded fund aimed at European investors.

The new Nomura Voltage Mid-Term Source ETF tracks the Nomura Voltage Strategy Mid-Term 30-day USD TR index and is designed to allow investors to capture volatility spikes while decreasing the costs associated with a constant long volatility position.

The dollar-denominated ETF provides volatility-adjusted exposure to the S&P 500 VIX Mid-Term Futures Index, allocating between this index and three-month US Treasury Bills. Allocation to the index is adjusted between 0 and 100 per cent according to its volatility. As such, the higher the relative volatility, the higher the allocation. According to the firm’s literature this methodology allows for a tactical model, which rebalances on a daily basis unlike standard options or most OTC volatility instruments.

“Volatility is a new asset class for many investors and the combination of the cost of rolling futures and the VIX index’s tendency revert to the mean, have posed challenges for long term investors. The Voltage strategy provides an innovative approach, which will help address these concerns,” said Ted Hood, chief executive of Source.

The Nomura Voltage Mid-Term Source ETF carries an annual management fee of 0.30 per cent per annum.

New products are coming thick and fast from Source; earlier this week the firm unveiled three new physically-backed precious metals exchange-traded commodities investing in silver, palladium and platinum.