KraneShares Quadratic Interest Rate Volatility and Inflation Hedge ETF

KraneShares Quadratic Interest Rate Volatility and Inflation Hedge ETF (IVOL) is an actively managed bond fund. It holds Treasury Inflation-Protected Securities (TIPS), mostly through the Schwab U.S. TIPS ETF, alongside options it buys that rise in value when the gap between long-term and short-term interest rates widens or when rates swing more. It is built as a hedge rather than for growth, and it costs 0.98% a year.

• Over the year to Oct 27, 2026, IVOL returned -10.4%, 8th of 8 among similar funds.
• Its 5-year annualized return was -6.2%.
• In the 2020 COVID crash, while stocks fell, it gained 0.4%.
• Its worst full calendar year was 2022 (-12.6%); its best was 2020 (+14.6%).
• The deepest fall in its price history was 32.3% (May 10, 2021 to Sep 23, 2026), not yet recovered.

As of Jun 30, 2026, the fund held 1 securities; the ten largest made up 77.38% of assets.

• Over the three months to Jun 30, 2026, investors withdrew a net $177.0M (creations minus redemptions, per the N-PORT report).
• Monthly total returns reported for that quarter: -2.57%, -2.81%, -0.99%.

IVOL does not track an index. Its sub-adviser, Quadratic Capital Management, picks the holdings using its own judgment. Most of the money goes into TIPS. These are US Treasury bonds whose principal rises with inflation, as measured by the Consumer Price Index. The fund may hold TIPS of any maturity, either directly or through other ETFs. As of June 30, 2026, 77.4% of assets sat in one fund, the Schwab U.S. TIPS ETF.

The rest of the strategy uses options that the fund buys, never sells. They are tied to the shape of the US SOFR interest rate curve and are traded privately with banks rather than on an exchange. They settle in cash at expiration. As of June 30, 2026, the fund held 10 such positions, worth 8.25% of assets. All were spread options on 2-year versus 10-year swap rates, expiring between 2027 and 2029. These options gain when the curve steepens or when rate volatility rises. They lose value, or expire worthless, when the curve flattens or inverts, when volatility falls, or simply as time passes. The most the fund can lose on them is what they are worth.

The manager usually keeps less than 20% of assets in options. It trims them after they rise and buys more after they fall. Expiring options are replaced with later ones, typically six months to three years out. Because the trades are private, a bank that fails to pay could cause a material loss.

• IVOL charges 0.98% a year, versus an average of 0.86% for the similar funds below (8th of 8, cheapest first).
• Of that, 0.99% is the management fee; the rest covers other fund expenses.
• The fee includes a 0.04% waiver from the adviser, which may end.
• Using the prospectus's standard example, $10,000 invested would cost about $100 in the first year and $1,240 over 10 years (assuming a 5% annual return).

IVOL is built to protect against inflation, a steepening yield curve and rising rate volatility, not to provide growth or steady income.

IVOL launched in 2019, so it has no record from the 2008 crisis. In the 2020 COVID crash it fell 8% but recovered within days, and it was up 0.4% over the market's full slide. In the 2022 bear market it lost 13.3%, and 2022 was its worst calendar year at -12.75%. Its deepest drop, 32.3% from May 10, 2021 to September 23, 2026, had not been recovered as of October 27, 2026. A retiree who had to sell shares during that stretch would have locked in losses.

The fund pays monthly. Its trailing 12-month yield was 3.99% as of October 27, 2026. It costs 0.98% a year, which works out to $100 on $10,000 in the first year under the SEC's standard example. Past results don't predict the future, and a plan should look at the whole portfolio, not one fund.

Matched by other buffer (defined-outcome) funds, largest first.