When it comes to equity-based volatility exchange traded funds, it is the “low vol” variety that command most of the attention and assets.
The PowerShares S&P 500 Low Volatility Portfolio (NYSEArca: SPLV) and the iShares MSCI USA Minimum Volatility ETF (NYSEArca: USMV) have over $6 billion in assets under management combined. Standing alone, each of those funds has more assets than all of the high beta equity ETFs on the market today. [Learning to Love Low Vol ETFs Again]
Some strategists opt for tactical approaches that exploit the advantages of both low and high beta ETFs.
Utah-based Lunt Capital runs a strategy using volatility ETFs that aims to “one-third of assets in U.S. equities, one-third in developed international equities, and one-third in emerging markets. However, on a quarterly basis, Lunt tilts the strategy toward a favored geography and away from a least favored one. As of the beginning of February 2014, the strategy had relatively high exposure to the U.S., relatively low exposure to emerging markets, and neutral exposure to developed international markets,” according to S&P Capital IQ.
This month, Lunt sold its position in the PowerShares S&P Emerging Markets Low Volatility Portfolio (NYSEArca: EELV) to move into EELV’s high beta cousin, the PowerShares S&P Emerging Markets High Beta Portfolio (NYSEArca: EEHB). While the combination of high beta and emerging markets sounds downright toxic in the current environment, EEHB has traded high this year while EELV and the iShares MSCI Emerging Markets Minimum Volatility ETF (NYSEArca: EEMV) are in the red. [Some EM ETFs Stand Strong]
EEHB, which S&P Capital rates marketweight, has been supported by a better than 19% combined weight to Indonesia and the Philippines, two of this year’s top-performing developing equity markets. [Good News for Some of Asia’s Best ETFs]