Exchange traded fund providers are introducing more ETFs designed for conservative investors who want to limit volatility in their portfolios.
BlackRock’s iShares this week listed four low-volatility ETFs. “The new funds can help provide a portfolio with downside protection while seeking to maintain some exposure to the upside price movement,” the investment manager said.
The new ETFs are iShares MSCI Emerging Markets Minimum Volatility Index Fund (EEMV), iShares MSCI EAFE Minimum Volatility Index Fund (EFAV), iShares MSCI USA Minimum Volatility Index Fund (USMV) and iShares All Country World Minimum Volatility Index Fund (ACWV).
PowerShares S&P 500 Low Volatility Fund (SPLV), launched in May, has been one of the most successful ETF launches of 2011. The fund has already gathered about $450 million in assets.
The heightened fear of a possible recession and the focus of Europe’s ongoing sovereign debt crisis has created a higher level of volatility in markets around the world.
“In today’s market environment, there is increased interest in managing risk and finding a solution via ETFs. Investors are seeking ’smart beta’ solutions,” Darek Wojnar, head of iShares product development at BlackRock, said in a press release. “The new iShares Minimum Volatility Funds can help investors to reduce overall risk in a portfolio while retaining equity exposures. These funds can provide a complement to the core passive portfolio, helping to optimize risk-adjusted returns over the long-term.”
The tracking indices “aim to reflect the performance characteristics of a minimum-variance, focused on absolute return and volatility with the lowest absolute risk,” according to MSCI.
Tisha Guerrero contributed to this article.