Some Overlooked Low-Volatility ETFs
August 22nd, 2012 at 7:24am by Tom Lydon
Low-volatility exchange traded funds offer investors the opportunity to track securities that mitigate the potential swings that would eat away returns during quick market corrections. While one low-volatility fund has attracted the lion’s share of assets in this sub-segment, investors have various ETF options at their disposal.
When investors consider a low-volatility ETF pick, most would turn to the PowerShares S&P 500 Low Volatility ETF (NYSEArca: SPLV), the largest fund in this category with $2.4 billion in assets under management. The ETF has a 0.25% expense ratio and a 2.94% yield. [Using Low-Volatility ETFs to Endure Market Swings]
SPLV follows 100 stocks from the S&P 500 that have exhibited the lowest realized volatility in the past year. Sector allocations include consumer discretionary 5.6%, consumer staples 30.9%, enegy 1.7%, financials 1.6%, health care 14.0%, industrials 3.7%, information technology 5.2%, materials 3.3%, telecom services 4.7% and utilities 29.3%. [Slow and Steady: Investors Favoring Dividend, Low-Volatility ETFs]
Investors, though, may consider other low-volatility ETF options available, including those that offer international market exposure:
EGShares Low Volatility Emerging Markets Dividend ETF (NYSEArca: HILO) tracks the Indxx Low Volatility Emerging Markets Dividend Index, providing high income along with less volatility, compared to the MSCI Emerging Markets Index. HILO has a 0.85% expense ratio and a 5.38% yield.
It limits positions to 5% each and country exposure to a maximum 5 securities. Country allocations include Brazil 18.3%, South Africa 14.6%, China 11.1%, Malaysia 10.4%, Thailand 8.7%, Poland 5.3%, Russia 5.2%, Philippines 5.2%, Hungary 5.1% and India 4.8%. Sector allocations include Telecom 34.5%, utilities 17.2%, industrials 15.3%, consumer goods 12.7% consumer services 5.8%, financials 5.6% and oil & gas 4.8%.
iShares MSCI All Country World Minimum Volatility Index Fund (NYSEArca: ACWV) follows emerging and developed equities that have lower absolute volatility. ACWV has a 0.35% expense ratio and a 3.87% 30-day SEC yield.
Country allocations include U.S. 53.1%, Japan 12.9%, Canada 6.7%, Switzerland 5.0%, Taiwan 4.0%, Hong Kong 3.4%, U.K. 3.4%, China 2.1%, Singapore 1.9% and Malaysia 1.4%. Sector allocations include consumer staples 15.3%, health care 14.3%, financials 13.8%, consumer discretionary 11.3%, telecom 9.5%, utilities 8.5%, information tech 7.7%, industrials 7.7%, energy 6.9% and materials 4.2%.
iShares MSCI Emerging Markets Minimum Volatility Index Fund (NYSEArca: EEMV) provides exposure to global emerging market equities that show lower absolute volatility. EEMV has a 0.25% expense ratio and a 2.48% 30-day SEC yield.
Country allocations include: Taiwan 15.6%, China 12.3%, South Korea 10.2%, Malaysia 8.6%, South Africa 8.4%, Brazil 8.2%, Thailand 6.6%, Chile 6.0%, Indonesia 5.5% and Colombia 3.8%. Sector allocations include: financials 24.8%, telecom 13.5%, consumer staples 13.3%, information tech 8.7%, utilities 8.4%, energy 8.0%, materials 7.1%, industrials 5.5%, health care 5.4% and consumer discretionary 4.8%.
iShares MSCI EAFE Minimum Volatility Index Fund (NYSEArca: EFAV) tracks Europe, Australasia, the Middle East and Far East, or EAFE countries, stocks that show lower absolute volatility. EFAV has a 0.20% expense ratio and a 6.88% 30-day SEC yield.
Country allocations include U.K. 28.2%, Japan 27.1%, Switzerland 11.6%, Hong Kong 8.2%, Singapore 5.7%, France 4.1%, Australia 3.9%, Germany 2.9%, Netherlands 1.7% and Israel 1.5%. Sector allocations include financials 17.4%, consumer staples 17.1%, health care 13.9%, industrials 12.2%, telecom services 10.6%, consumer discretionary 9.0%, utilities 8.9%, materials 4.7%, energy 3.5% information tech 2.3%.
iShares MSCI USA Minimum Volatility Index Fund (NYSEArca: USMV) follows the top 85% U.S. equity securities by market-cap that show lower absolute volatility. USMV has a 0.15% expense ratio and a 2.48% 30-day SEC yield.
Sector allocations include health care 16.3%, consumer staples 15.7%, information tech 14.7%, consumer discretionary 10.8%, financials 9.6%, utilities 8.3%, energy 8.0%, telecom services 7.0%, industrials 6.0% and materials 3.5%.
PowerShares S&P Emerging Markets Low Volatility Portfolio (NYSEArca: EELV) provides access to the 200 least volatile stocks of the S&P Merging BMI Plus LargeMid Cap Index. EELV has a 0.29% expense ratio and a 2.54% 30-day SEC yield.
Country allocations include Malaysia 26.1%, South Africa 21.2%, Taiwan 11.2%, Brazil 6.9%, Chile 6.3%, Colombia 5.8%, South Korea 4.0%, Mexico 4.0%, Philippines 3.1% and Thailand 2.9%. Sector allocations include consumer discretionary 7.9%, consumer staples 16.1%, energy 3.1%, financials 26.4%, health care 3.4%, industrials 8.7%, info tech 1.7%, investment companies 1.0%, materials 7.8%, telecom services 11.6% and utilities 12.3%.
PowerShares S&P International Developed Low Volatility (NYSEArca: IDLV) tracks the 200 least volatile stocks of the S&P Developed ex-U.S. and South Korea LargeMid Cap BMI Index. IDLV has a 0.25% expense ratio and a 3.01% 30-day SEC yield.
Country allocations include Japan 43.2%, Canada 16.8%, Singapore 8.5%, New Zealand 7.4%, U.K. 7.0%, Australia 6.9%, Hong Kong 3.3%, Switzerland 2.5%, Netherlands 1.0% and Belgium 0.9%. Sector allocations include consumer discretionary 11.6%, consumer staples 19.9%, energy 1.9%, financials 20.0%, health care 10.8%, industrials 18.3%, materials 0.4%, telecom services 7.7% and utilities 9.4%.
For more information on low volatility funds, visit our low-volatility category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.