The low volatility investment strategy has resonated well with investors, and in an attempt to improve upon the theme, Victory Capital has launched a minimum volatility exchange traded fund that begins with a universe of carefully selected securities.
On Thursday, Victory Capital launched the VictoryShares US Multi-Factor Minimum Volatility ETF (NasdaqGS: VSMV). VSMV has a 0.35% net expense ratio.
“We believe our two-step approach improves upon the process used by other minimum volatility ETF offerings available today,” Mannik Dhillon, President, VictoryShares and Solutions, said in a note. “We use a multi-factor approach to select a starting universe that has the potential to enhance returns and then optimize the portfolio with the aim of reducing volatility. Many minimum volatility strategies focus only on the latter step.”
The Multi-Factor Minimum Volatility ETF tries to reflect the performance of the Nasdaq Victory US Multi-Factor Minimum Volatility Index. The strategy first starts with a universe of mid- and large-cap U.S. companies taken from the Nasdaq US Large Mid Cap Index and then ranking the companies using a number of proprietary fundamental factors like dividend yield, sales growth and other financial metrics identified by a quantitative multi-factor selection process to identify those most likely to outperform the broader market. Furthermore, the underlying index uses an optimization tool to weight individual securities to minimize absolute volatility.