As was the case with the PDP/SPLV strategy, data provided by EELV and PIE are too compelling to ignore. A 100% allocation to EELV backtested to 1999 shows an average loss of 6.2% during the worst six-month period, but a 100% allocation to PIE was far worse with a 46% tumble. Allocating 70% to EELV and 30% to PIE resulted in a May-October loss of almost 19%.
EELV is something of an unsung hero among low volatility ETFs. The ETF has raked in almost $135 million of its $218.4 million in assets just this year. Heavy allocations to Taiwan, Malaysia and South Korea make the ETF a compelling choice in an environment where account surplus, low-beta emerging markets are prized by investors. [Emerging Markets Low Volatility ETFs]
PIE, which ranks its country weights by relative strength traits, was hit earlier this year due to large weights to Turkey, Thailand and other countries that proved vulnerable to Federal Reserve tapering speculation.
These days, PIE has taken a page from EELV’s book by offering significant exposure to account surplus countries as Taiwan, China and South Korea combine for over 42% of the fund’s weight. [PIE Slices: How This EM ETF Looks for Q4]
Not surprisingly, things look much different for EELV and PIE in the November-April time frame. EELV returned 324% dating back to 1999, but that is barely more than half what PIE returned, according to Dorsey Wright data.
EELV/PIE Best & Worst Six-Month Returns
Charts courtesy Dorsey Wright.