Once popular currency-hedged ETF strategies have been losing their appeal this year. In 2015, 46% of surveyed respondents reported making a currency-hedged purchase, whereas 37% of respondents said they made a similar purchase over the first 11 months of 2016 and only 31% indicate they are likely to purchase such a strategy in the next 12 months.
On the other hand, minimum volatility strategies have been on fire. However, while the PowerShares S&P 500 Low Volatility Portfolio (NYSEArca: SPLV) and the iShares MSCI USA Minimum Volatility ETF (NYSEArca: USMV) have been go-to picks for low-vole exposure, CFRA reminds investors that it is important to look at what’s inside.
“Due to different methodologies, USMV has more exposure to information technology stocks and less exposure to consumer staples stocks than SPLV,” Rossenbluth added. “USMV holds almost 200 stocks, and the top 10 comprise about 15% of the assets. Meanwhile, SPLV holds only 100 stocks and the top 10 make up about 12% of assets.”
As with other ETFs that have similar names or track similar industries, investors should carefully look through the underlying holdings as component weights and sector tilts may drastically vary.
For more information on ETFs, visit our ETF 101 category.