The low-volatility factor investments work on the idea that they help cushion against market turns, limiting drawdowns that investors experience while providing upside potential. Consequently, the low- or min-vol strategies may produce better risk-adjusted returns over the long haul, which has been backed by extensive academic research.
Supporting the low-vol performance, MSCI pointed to beta, the degree to which stocks tend to move in the same direction as the market, along with dividend yields. Low-vol ETFs have been strengthening this year as they limited downside risk when the markets slipped and strengthened on increased defensive bets during turbulent times.
For more information on the low-vol strategy, visit our low-volatility category.
iShares MSCI Emerging Markets Minimum Volatility ETF