SPLV launched in the spring before the August melt-down, and provided investors some protection by outperforming the S&P 500 in the second half of 2011. However, the ETF is trailing the S&P 500 this year, gaining 2.4% compared with a 9.5% return for the stock index, according to Morningstar.
“No strategy works all the time. Low-volatility ETFs are likely to underperform when cyclical industries such as energy and base metals are booming, or when market sentiment as a whole is very bullish,” Luukko said. “With stocks around the world posting strong gains in the first two months of this year, it hasn’t been a favorable environment for a low-volatility strategy … They also tend to favor defensive industries like consumer staples.”
Other ETFs in the category include MSCI USA Minimum Volatility Fund (NYSEArca: USMV) and Russell 100 Low Volatility ETF (NYSEArca: LVOL). [Ups and Downs of Low-Volatility ETFs]
PowerShares S&P 500 Low Volatility Portfolio
