The VictoryShares volatility weighted approach should not be confused with low-vol strategies, which are designed to capture excess returns to stocks with lower-than-average volatility, beta, and/or idiosyncratic risk.
While low-vol ETFs may only hold companies that tend to exhibit smaller swings using the factor as a selection, the VictoryShares suite starts with the broad market and screens for companies with four quarters of positive earnings. Those stocks are then weighted based on their standard deviation over the past 180 trading days. Stocks with lower volatility are given higher weightings and stocks with greater volatility are given lower weightings. Ultimately, all securities that pass the earnings criteria are present, just at different weights.
“Be aware of profitability and exporting to other nations – not always the best,” Dhillon said. “Volatility weightings starts with profitable companies only – not loading up on big exporting countries – more stocks that stick to their own companies.”
Consequently, with the volatility weights, you end up with a more balanced and risk-aware approach to investing in the broad markets.
VictoryShares also offers other broad equity plays, including the VictoryShares US 500 Volatility Wtd ETF (NasdaqGM: CFA), VictoryShares US Small Cap Volatility Wtd ETF (NasdaqGM: CSA) and VictoryShares International Volatility Wtd ETF (NasdaqGM: CIL).
The volatility-weight suit is also comprised of a high dividend category, which helps limit the inherent volatility in higher yielding stocks. The options include VictoryShares US Large Cap High Div Volatility Wtd ETF (NasdaqGM: CDL), VictoryShares US Small Cap High Div Volatility Wtd ETF (NasdaqGM: CSB) and VictoryShares International High Div Volatility Wtd ETF (NasdaqGM: CID).
Additionally, the VictoryShares US 500 Enhanced Volatility Wtd ETF (NasdaqGM: CFO), VictoryShares US EQ Income Enhanced Volatility Wtd ETF (NasdaqGM: CDC), VictoryShares US Discovery Enhanced Volatility Wtd ETF (NasdaqGM: CSF) and VictoryShares Developed Enhanced Volatility Wtd ETF (NasdaqGM: CIZ) shift from a long position to cash position depending on market swings to help investors better manage risk exposure.