“Investors need to keep in mind, though, that low volatility can also bring returns that trail the market. In 2011, when the S&P 500 was on fire, returning 32 percent, SPLV had a return of 23 percent. This is SPLV working as advertised—a muted reaction on the way down in return for lagging on the way up,” reports Eric Balchunas for Bloomberg.
The differing methodologies and potential for some lag when riskier fare leads equities higher has not deterred investors from low volatility ETFs. Low volatility ETFs are among the most popular smart beta strategies and have over $15 billion in combined assets.
PowerShares S&P 500 Low Volatility Portfolio
