Of course, utilities are the group worst affected by rising interest rates. So the double dose of good news for SPLV is its scant utilities weight combined with a 35.6% weight to financial services names, by far the ETF’s largest sector allocation. Digging deeper into SPLV’s financial services lineup reveals opportunity. Seventeen of the ETF’s financial services holdings are either insurance providers or regional banks, two industries that are positively correlated to rising interest rates. [Regional Bank ETFs Surge]
“In fact, since its May 2011 inception, SPLV has exhibited lower volatility than the S&P 500 Index. This is because the fund’s underlying index follows an unconstrained investment approach that allows for dynamic sector rotation,” according to PowerShares. “Due to SPLV’s unconstrained sector rotations, the fund has shed much of its exposure to the underperforming utility sector over the past two years, from just over 30% in March 2013 to under 3% currently.”
SPLV’s primary rival, the iShares MSCI USA Minimum Volatility ETF (NYSEArca: USMV), has a utilities weight of 7.7%, nearly triple that of the PowerShares offering.
PowerShares S&P 500 Low Volatility Portfolio
