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.
The newest members of the iShares minimum volatility lineup are the iShares MSCI Europe Minimum Volatility ETF (NYSEArca: EUMV), the iShares MSCI Japan Minimum Volatility ETF(NYSEArca: JPMV) and the iShares MSCI Asia ex Japan Minimum Volatility ETF (NYSEArca: AXJV).
Those ETFs, which debuted in June 2014, have a combined $17.8 million in assets.
iShares MSCI USA Minimum Volatility ETF
ETF Trends editorial team contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.