Low-volatility ETFs have pulled in nearly $4 billion of new investor cash this year and now Vanguard is considering joining the party.
“We’re having a hard look at it, honestly. If you can minimize the volatility in some of these portfolios, especially in (investors’) retirement years when they’re drawing (their nest eggs) down, that could make a difference,” incoming Vanguard chief investment officer Tim Buckley tells Morningstar.
“That could make a big difference. So, I’d say more to come on that,” Buckley said.
Vanguard is the third-largest U.S. ETF provider but saw the highest inflows of any firm during the first three quarters with $42.4 billion, according to industry data.
With the dot-com bust and subprime meltdown still fresh in the minds of many investors and advisors, low-volatility ETFs almost sell themselves. The funds appeal to investors who want equity exposure but with a strategy that tries to limit downside risk. Volatility is a measure of a stock’s tendency to jump around in price.
PowerShares S&P 500 Low Volatility (NYSEArca: SPLV) is the oldest and largest ETF in the category with $2.7 billion in assets The tracking index consists of the 100 stocks from the S&P 500 with the lowest realized volatility over the past year.