An ETF to Cure Greek Volatility Blues

In the chart below, “the red line shows the performance of the S&P 500 Low Volatility Index relative to the S&P 500 Index, based on weekly closing data. When we compare the red line with the blue line, we see that the S&P 500 Low Volatility Index outperformed the S&P 500 Index during each wave of credit stress in the Eurozone,” notes PowerShares.

Chart Courtesy: PowerShares

SPLV is not the oldest ETF out there. It turns four in May, but the ETF’s debut date of May 2011 provides for a good barometer of how the fund performs when investor anxiety is high because of European issues. In 2011, SPLV outperformed the S&P 500 as fears of a Eurozone debt contagion spike. In 2013, when some investors rushed back to Europe, SPLV lagged the benchmark U.S. index.

SPLV targets 100 of the least volatile stocks from the S&P 500 index and weights the positions inverse to volatility – the least volatile stocks have a greater weight in in the portfolio. Over the past year, SPLV, which pays a monthly dividend, has added $943.6 million in new assets, second only to the PowerShares FTSE RAFI US 1000 Portfolio (NYSEArca: PRF) among PowerShares ETFs over that period.