It feels like it has been awhile since “Low Volatility” funds have been spoken about at length even though they are clearly an area of great interest among advisors and institutions judging from the growth of the funds over time.
USMV (iShares MSCI USA Minimum Volatility, Expense Ratio 0.15%) is once again on our radar here at least thanks to recent creation activity in the fund, adding >$220 million in recent sessions, as the fund continues to break out to new highs.
The fund has $2.33 billion in assets under management now, and averages about 466,000 shares traded daily. Recent performance has been boosted by the rally in Consumer Staples stocks (we have talked about XLP,
SPDR Consumer Staples, Expense Ratio 0.18% call buying for a few weeks now) as we highlight USMV’s portfolio exposure to names like PEP (1.55%), GIS (1.54%), and WMT (1.50%) for instance. The recent inflows in USMV continue a trend of impressive asset flow year to date, as the fund has now pulled in $1.28 billion in 2013.
Related fund, SPLV (PowerShares S&P 500 Low Volatility, Expense Ratio 0.25%) by comparison has attracted $281 million year to date, and an impressive number in its own right, one can quickly see the notable difference
in the two totals. SPLV remains the larger of the two funds that target the U.S. Equity “Low Volatility” space, with $3.98 billion in assets under management as well as averaging considerably higher daily volume than USMV (1.25 million shares in ADV).
One might expect this given the fund’s first mover advantage and its early May of 2011 launch, while USMV entered the marketplace in October of 2011. SPLV is also breaking out in terms of price action today as well with top weightings in names including JNJ (1.42%), NEE (1.30%), ED (1.28%), DTE (1.27%), and K (1.27%).
What is notable is that SPLV has the lion’s share of its portfolio exposure weighted 29.81% to Utilities and 20.26% to Consumer Staples, while USMV has very different makeup (17.63% to Healthcare, 16.59% to Consumer Staples, 10.67% to Industrials, 9.6% to Financials, and 8.26% to Utilities).