Cautious investors have been piling into low-volatility exchange traded funds to hedge against potential bumps down the road. However, low-volatility options with a heavy tilt toward defensive utilities have experienced outflows recently.

The PowerShares S&P 500 Low Volatility Portfolio (NYSEArca: SPLV) saw $654.6 million in outflows over May, according to IndexUniverse. The ETF is down 3.3% over the past month, whereas the S&P 500 Index gained 1.9%.

SPLV tracks a basket of 100 stocks from the S&P 500 Index that shows the lowest realized volatility over the past 12 months. Consequently, the fund has a large weighting in defensive sector utilities at 29.6%. Utilities were one of the worst performing sectors in May, with the Utilities Select Sector SPDR (NYSEArca: XLU) down 7.7% over the past month.

In comparison, the iShares MSCI USA Minimum Volatility ETF (NYSEArca: USMV) performed slightly better than the SPLV, dipping 2.1% over the past month, and attracted $62.3 million in assets over May. The better performance may be attributed to the fund’s smaller allocation toward utilities. [iShares: No, It’s Not A Minimum-Volatility ETF Bubble]

USMV requires “stock weights within 0.05% to 1.5% of the portfolio, sector weightings within 5% of the market-weighted index, and a one-way turnover of 10%,” writes ETF strategist Samuel Lee for Morningstar.

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