Investors considering EEMV should note that is fund, like other low volatility ETFs, focuses more more slow and stable companies, the low volatility strategy may underperform more growth-oriented stocks if the markets turn around.
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.
EEMV also “limits sector and country tilts relative to the MSCI Emerging Markets Index, exposure to individual names, and turnover, which reduces transaction costs. The resulting portfolio is well-diversified, with more than 250 holdings, and top holdings include companies with more stable fundamentals than the typical constituent of the MSCI Emerging Markets Index. Though investors should expect it to lag in strong market rallies, it will likely hold up better than peers in weaker markets.”
For more information on the low-vol strategy, visit our low-volatility category.