Low-Volatility ETFs Are More Than What They Appear | Page 2 of 2 | ETF Trends

“This was particularly important during the initial 2018 correction in Jan/Feb where we saw passively implemented low vol ETFs underperform expectations as they were overly concentrated in defensive stocks that underperform in rising rate environments. MVIN was not affected in a similar manner and reduced the magnitude of that drawdown (1/25-2/9) by 30%,” Piré added.

MVIN focuses on developed markets and tries to generate long-term capital appreciation with less volatility than typically experienced by international equity markets – the minimum volatility approach helps diminish portfolio risk.

The international minimum volatility fund will utilize both quantitative and qualitative factors to identify securities with lower volatility and a reduce the ETF’s overall volatility relative to the developed international equity market. The fund managers will screen for volatility of each individual equity security and correlation of each individual equity security to all other equity securities i the investment universe of international developed stocks.

For more information on alternative index-based strategies, visit our smart beta category.