However, he theorizes the popularity of low-volatility approaches has changed the nature of the investments. In particular, low-volatility ETFs have moved away from a value strategy, Swedroe said.
“The evidence behind low-volatility investing is truly impressive. However, low-volatility strategies can underperform during bull markets,” says Morningstar ETF analyst Samuel Lee in a report on SPLV.
The ETF’s biggest sector weighting is in utilities at 25.7% of the portfolio. Utilities Select Sector SPDR (NYSEArca: XLU) has posted a total return of 9.6% this year. Utilities are one of the worst-performing sectors amid the move higher in interest rates.
The chart below shows the performance of sector ETFs against the S&P 500 this year.
