Amid turbulent market conditions to start 2015, investors have favored low and minimum volatility exchange traded funds for equity allocations and that has been a boon for the major issues of these ETFs.
On Monday, BlackRock’s (NYSE: BLK) iShares unit, the world’s largest issuer of ETFs, said its seven ETF suite of minimum volatility funds topped a combined $10 billion in assets under management. The bulk of that $10 billion is concentrated in the iShares MSCI USA Minimum Volatility ETF (NYSEArca: USMV). USMV, which debuted in October 2011, is now a $4.4 billion, trailing only the $5.6 billion PowerShares S&P 500 Low Volatility Portfolio (NYSEArca: SPLV) for supremacy among “low vol” ETFs. [Low Volatility ETFs Shine in Rocky Markets]
USMV and SPLV have added $840.8 million and $379.4 million, respectively, in new assets this year. A a rise in volatility has helped the least volatile stocks standout. Moreover, low-volatility equities are experiencing greater demand due to low interest rates. Traditionally, investors would turn to fixed-income assets to diminish risk exposure. However, with rates more likely to rise and the U.S. economy expected to continue expanding, investors have turned to low-volatile stock options to capture a growing equities market and to hedge some of the market risks. [Low-Volatility ETF Strategies Shine For Now]
Investors have also embraced international low volatility ETFs as avenues for gaining exposure to well-known benchmarks, such as the MSCI EAFE Index and the MSCI Emerging Markets Index. For example, the iShares MSCI Emerging Markets Minimum Volatility ETF (NYSEArca: EEMV) is now home to over $2 billion in assets under management after adding $151.3 million this year.
Investors have poured $301 million into the iShares MSCI EAFE Minimum Volatility ETF (NYSEArca: EFAV) this year, making that a $1.7 billion fund. Both EEMV and EFAV debuted alongside USMV in October 2011.
The iShares MSCI All Country World Minimum Volatility ETF (NYSEArca: ACWV) takes about 340 of the least volatile stocks from the parent MSCI All Country World Index, selecting components based on the Barra Global Equity Model, along with a number of constraints to limit turnover. That ETF, which also debuted in October 2011, also has $1.7 billion in assets.