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Temper expectations for low volatility

Aug. 19, 2016 12:54 PM ETSPLV, IDLV, USMV, EFAV, XMLV, XSLV, LGLV, SMLV, CDC, CFA, CFO, CSF, CIZ, HDLV, XRLV, FXEP, HEFV, ONEV, LVHD, OVLCBy: Stephen Alpher, SA News Editor1 Comment
  • As of the end of last month, low volatility ETFs have seen a full $13B of inflows this year, and over the last 12 months, the MSCI World Minimum Volatility Index has surged 13.3% vs. a 0.5% decline for the MSCI World Index.
  • Thanks to pricier valuations for low vol names, SSgA head of research Dave Mazza suggests the next 12 months, not to mention the next three to five years, won't be as favorable. If you're buying low vol to help smooth out your portfolio's volatility for the long-term, that's fine, he says, but if you're looking for better returns than a broader index, you'll be disappointed.
  • Commonwealth Financial Networks portfolio manager Peter Essele: "Every dollar that moves in [to low volatility] is becoming more and more exposed to overweighted securities that are trading well above long-term averages."
  • ETFs: SPLV, USMV, EFAV, HDLV, IDLV, XMLV, XSLV, SMLV, LGLV, CFA, CDC, CFO, XRLV, LVHD, CIZ, CSF, OVLC, ONEV, FXEP, HEFV

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