State Street Planning Actively Managed Low-Volatility ETFs
September 26th, 2012 at 5:53am by Tom Lydon
Low-volatility exchange traded funds have garnered a lot of attention after investors were burned by the wild market swings in recent years. Joining in on the party, State Street Global Advisors plans to launch its own set of actively managed, low-volatility ETFs.
According to an SEC filing, SSgA, the provider behind the SPDR suite of ETFs, is working on the active SPDR SSgA US Minimum Volatility ETF and a SPDR SSgA Global Minimum Volatility ETF. No tickers or expense ratios were provided. [Low-Volatility ETF Demand Fueled by Desire for Safety]
The US Minimum Volatility ETF will utilize a proprietary method to select U.S. equities with low long-term volatility and low risk factor characteristics – considerations in determining a security’s risk include size, momentum, value, liquidity, leverage and growth. [Low-Volatility ETFs: 'Boring is Beautiful']
The Global Minimum Volatility ETF will hold global equities with low long-term volatility and show low risk factors.
While these types of “low-volatility” ETFs may help investors maintain a stable portfolio during the tough times, investors may not capture the full force of a bull market rally during a risk-on environment since these funds are heavily allocated in safer picks.
In the meantime, investors who are interested ETFs in the low-volatility theme can take a look at the passively managed offerings currently available, including:
- PowerShares S&P 500 Low Volatility Portfolio (NYSEArca: SPLV). The ETF tracks S&P 500 stocks that exhibit low price swings. SPLV has a 0.25% expense ratio.
- iShares MSCI USA Minimum Volatility Index Fund (NYSEArca: USMV). The fund follows the MSCI USA Minimum Volatility Index, which is comprised of U.S. stocks that show low volatility. USMV has a 0.15% expense ratio.
Additionally, there are low-volatility ETFs with an international focus:
- iShares MSCI All Country World Minimum Volatility Index Fund (NYSEArca: ACWV). This ETF includes exposure to global equities that exhibit low levels of volatility. ACWV has a 0.35% expense ratio.
- iShares MSCI EAFE Minimum Volatility Index Fund (NYSEArca: EFAV). The fund tracks stocks with low-volatility from developed markets in Europe, Australasia and Far East, or EAFE. EFAV has a 0.20% expense ratio.
- iShares MSCI Emerging Markets Minimum Volatility Index Fund (NYSEArca: EEMV). The ETF follows low-volatility stocks from emerging market countries. EEMV has 0.25% expense ratio.
For more information on new product launches, visit our new ETFs 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.