For advisors allocating to high-growth areas such as the Nasdaq 100, the challenge often lies not in identifying opportunities but in managing the risk that comes with them. The WEBs Defined Volatility QQQ ETF (ticker: DVQQ) offers a distinct alternative to traditional buy-and-hold strategies by using a rules-based system that adjusts exposure based on short-term realized volatility. Built around the Invesco QQQ Trust (QQQ), the fund seeks to keep clients invested in a familiar growth index—while dialing up or down the risk depending on current market conditions.
In an interview with The Wealth Advisor’s Scott Martin, Ben Fulton, President and CEO of WEBs Investments, discussed how the firm’s Defined Volatility℠ strategy series, backed by Westwood’s distribution and operational support, aims to offer a new way to own existing exchange-traded funds (ETFs) like QQQ. Rather than making subjective calls or chasing trends, the DVQQ model monitors volatility daily and adjusts exposure accordingly.
A Different Take on Risk Management
Defined outcome ETFs have become increasingly popular for advisors looking to mitigate downside in volatile markets. But according to Fulton, that approach solves only part of the problem. “People don’t just have fear in the market. They also want to participate in the market,” he says. “So, how do we create a product that both hopefully helps smooth out the ride during chop but yet maintain or possibly even enhance the possibility of returns of the future when things calm down?”
Instead of setting guardrails for a single outcome, DVQQ targets a specific long-term volatility level—22%, in line with QQQ’s historical standard deviation—and lets that metric guide its allocations. This philosophy is grounded in balance: reducing exposure when volatility spikes, increasing it when conditions are calm, and avoiding emotional decisions along the way. As Fulton puts it, “You want something that automatically adjusts and recognizes what’s happening in the marketplace. That’s what we’re doing, helping to try to make great ETFs maybe even better.”
The functionality, he adds, is similar to that of a Nest thermostat: “You’re not sure if you need heat or cold, but you know where you’re comfortable, and where I’m comfortable should be something I should be able to address within my investments.”
The Mechanics of Volatility Engineering
At the core of DVQQ’s strategy is a simple daily comparison between the trailing 21-day realized volatility of QQQ and the long-term target. If short-term volatility is lower than the target, the fund increases exposure, using a combination of the QQQ ETF and derivatives, specifically total return swaps. If it’s higher, the model reduces exposure and moves more of the portfolio into cash. When the two volatility readings are in line, the fund stays put.
As of early July, Fulton says, volatility levels are below the target. “So, we’re almost over 190% exposure right now.” He emphasizes that the fund doesn’t need to rebalance every day—just when the exposure moves outside a defined range. In most cases, the model trades only once or twice per week.
Importantly, the strategy is entirely systematic, reducing the risk of emotion-driven decisions during periods of market stress. “There are no decisions we have to make. It’s an emotionless process. We just measure a ratio then adjust to bring everything in line,” he says. That process aims to remove human bias from the equation, potentially keeping investors more disciplined during periods of uncertainty.
Unlike implied volatility metrics such as the CBOE Volatility Index (VIX), which measure expectations and are dependent on options market pricing, DVQQ relies on realized volatility—what’s actually happened. “The world commonly looks at the VIX. The VIX is not realized volatility, but it’s more future looking. It’s based on the curve of the options that are out there,” Fulton explains. “We chose realized volatility. All we’re doing is taking tools that are out there. If that is the barometer of risk, then we should recognize that, and let’s adjust the portfolio accordingly.”
Real-World Application During Market Stress
In early 2025, as geopolitical and regulatory uncertainty spiked, DVQQ provided a live example of how the strategy works in practice. During that period, the fund’s model reduced exposure significantly. “We had about 60% cash, 40% exposure to the Qs,” Fulton recalls. The volatility, he notes, didn’t stem from traditional financial panic—it was driven by policy headlines out of Washington, which are notoriously hard to forecast.
What followed was equally instructive: as the regulatory fears eased, the model gradually ramped exposure back up. “Now you go, ‘Oh, but we look at our model and that’s right,’” Fulton says, illustrating how the strategy adapts in real time as conditions change.
He emphasizes that the model’s past behavior aligns with investor psychology. “Most of us are fearful at times, and we’re greedy at times. And there’s times where we sit there and say, ‘You know what? The market’s going to take off. I want to make sure I’m part of it.’ But when all of a sudden the environment changes, I want to see my exposure go down.”
A Complement to, Not a Replacement for, the ETF Ecosystem
DVQQ doesn’t replace QQQ—it owns it. Fulton, who formerly ran Invesco’s global ETF business and oversaw the QQQ franchise, sees DVQQ as a complementary tool rather than a competing product. “We’re more of a partner to the ETF industry than a competitor,” he says. “We provide something that’s unique and different.”
That collaborative approach extends beyond QQQ. Fulton mentions plans to apply the Defined Volatility framework to sector ETFs in partnership with issuers like State Street. By buying existing ETFs and wrapping them in its volatility methodology, WEBs aims to give advisors new tools for managing sector access in a more measured way.
“We’re trying to give what we feel is maybe a more appropriate and better way for advisors to get that same exposure,” he says. “We’re saying, ‘We do not need new ETFs, but maybe we need a new way to own those ETFs.’”
Why Advisors Might Consider DVQQ
For advisors who already allocate to QQQ, DVQQ might offer a more responsive, behaviorally sustainable version of the same exposure. The underlying holdings remain tied to large-cap growth, but the dynamic volatility overlay may help reduce the stress of staying invested through turbulent markets.
“Naked QQQ exposure, my clients can get that on their own. They don’t need me anymore,” Fulton says. “DVQQ, on the other hand, I’m telling them we’ve got some of the best minds in the world working on this.”
By outsourcing volatility management to a transparent, rules-based model, advisors may be able to focus less on timing market moves and more on client outcomes. The systematic approach might also help reduce client anxiety during market pullbacks, offering a clearer rationale for staying invested.
Sector Applications and a Broader Vision
As the firm expands its Defined Volatility strategy series to sector ETFs, Fulton sees parallels to the late 1980s, when sector rotation strategies first gained popularity. In today’s environment of constant reversals and rapid shifts between growth and value, interest rate sensitivity, and triggering macro headlines, sector-based tools that adapt to volatility could become especially useful.
“It’s not a homogeneous market,” he says. For example, “technology can tend to get over its skis, but we also realize technology has a different volatility skew than utilities.” The Defined Volatility framework is flexible enough to handle those sector-level differences, as it relies on realized risk rather than assumptions or market sentiment.
That adaptability makes the model potentially widely applicable. “We can calculate this on anything,” Fulton notes, underscoring that the strategy doesn’t depend on VIX-style data, which may not be available for every asset class.
A Tool for Evolving Advisor Portfolios
DVQQ isn’t trying to reinvent the ETF—it’s offering a new way to stay invested in one of the most widely used growth exposures in the market. By adjusting to short-term volatility with a clear, mechanical framework, the fund is designed to help investors capture more of the market’s upside while seeking to limit the impact of its rougher patches.
Fulton sums up the strategy’s value proposition with a fitting analogy: “It’s like putting better suspension or better shocks on your car and maybe increasing the horsepower at the same time.”
For advisors looking to help clients remain committed to their equity allocations without overreacting to volatility, DVQQ provides a rules-based structure that aims to do just that—adjust the ride without changing the destination.
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Additional Resources
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Disclosures
Investment involves risk, including possible loss of principal. There is no guarantee the funds will achieve their investment objectives and may not be suitable for all investors. No strategy can guarantee a profit or protect against a loss.
An investor should consider the investment objectives, risks, charges and expenses of the fund carefully before investing. A prospectus which contains this and other information about the fund may be obtained by calling (844) 455-9327 or by visiting the product page https://www.websinv.com/ and selecting a specific fund.
Distributor, Foreside Fund Services, LLC.
For more information on QQQ, visit: https://www.invesco.com/qqq-etf/en/about.html.
WEBs Investments Inc. is unaffiliated with Scott Martin, The Wealth Advisor and PowerShares.
Definitions
Defined Volatility–Defined Volatility refers to rules-based investment strategy that seeks exposure to an underlying ETF while targeting an annual volatility level.
Derivative–A derivative is a financial contract whose value is based on, or derived from, the value of an underlying asset, index, or reference rate. Common types of derivatives include futures, options, and swaps. Derivatives may be used for hedging, speculation, or investment purposes. These instruments can involve risks, including leverage, market volatility, and potential loss of principal.
Swap–A swap is a financial contract in which two parties agree to exchange cash flows or other financial instruments based on predetermined terms. Common types of swaps include interest rate swaps, currency swaps, and total return swaps, which allow investors to manage risk or gain exposure to specific financial assets.
