ACWV tracks the MSCI All Country World Minimum Volatility Index, which aims to create the lowest-volatility portfolio possible with the securities in the MSCI All Country World Index, a global market-weighted index, reports Lee. [BlackRock Lists Four Low-Volatility ETFs]
The largest risk to the low-volatility strategy is the ETFs precise and active methodology to pick a few hundred stocks to represent the world market. Tracking error is the biggest threat to the performance of the ETF due to the Barra equity model. Minimum variance is the goal, with areas such as risk factor exposures for each security in the MSCI ACWI, the covariances of all the risk factors, and the covariances of all the securities at play.
The ongoing Eurozone drama is sure to keep market uncertainty high, and the slowdown in the U.S. economy will add to this. In other words, market volatility is here to stay for a while, so a low-volatility ETF can help protect a portfolio.
iShares MSCI All Country World Minimum Volatility
Tisha Guerrero contributed to this article.