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“According to Morningstar, since the fund’s inception it has managed to capture roughly 80% of the S&P 500’s upside and only 51% of its downside. These ratios aren’t the only risk metrics that show the fund delivers on its objective. Using the monthly standard deviation of returns over the past one-, three- and five-year lookbacks suggests that the fund is roughly 20% less risky than the S&P 500. The fund’s beta of 0.67 intimates that it might be even less risky than that,” reports ETF Daily News.
[related_stories]The low-vol strategy targets stocks that have lower expected risk or less idiosyncratic risks. Specifically, the strategy focuses on equities that exhibit lower beta, a measure of volatility or systematic risk of a security to that of the overall market. Consequently, minimum volatility portfolios are comprised of stocks that exhibit lower market risk or beta.
USMV “has delivered on its goal of risk minimization, it hasn’t done so at the expense of returns. Year-to-date, the Minimum Volatility ETF has beaten the S&P 500 by about 2%. Since inception, its 90% return narrowly trails the 93% return of the benchmark index,” notes ETF Daily News.
For more information on the low-vol strategy, visit our low-volatility category.