We have mentioned a renewal in interest in “Low Volatility Equity” or managed volatility ETF products here in January of 2015, which is really not surprising considering the actual volatility from day to day that stocks have displayed for most of this month.
The VIX itself actually eclipsed $21 briefly before pulling back to its current level in the high $19’s. Investment managers continue to be interested in “Currency Hedged Equity” exposure via ETFs evident by recent fund-flow trends, which are predicated on limiting overall volatility by removing the “Exchange Rate” wild card factor from the equation, and likewise, “Low Vol Equity” funds have attracted action lately as well.
USMV (iShares MSCI USA Minimum Volatility, Expense Ratio 0.15%) is a good example here, having pulled in more than $400 million in new assets via creation in recent sessions, bringing the fund asset base north of $4.2 billion.
When USMV debuted back in October of 2011 it was frequently compared to PowerShares’ SPLV (S&P 500 Low Volatility Portfolio, Expense Ratio 0.25%) which started trading several months prior in 2011. Both funds have been successful in terms of attracting assets, as SPLV’s AUM is north of $5.4 billion.
The two funds when examined more closely are peers in a way, but also different in that USMV is categorized as “All Cap Equity” while SPLV has a “Large Cap Blend Equity”
bias. From a sector standpoint we see USMV’s highest exposures currently to Health Care >19.7%, Consumer Staples >15.9%, and Industrials >10.4% while SPLV leans heaviest toward Financial Services (>18.5%), and Utilities (>18.4%).