Is now the time to revisit volatility as a key investing metric? Economic and political factors in the U.S. and globally may add to interest in a fund like the Fidelity Low Volatility Factor ETF (FDLO). Low volatility investing provides a slew of potential benefits. It could make for a helpful addition to a portfolio as market narratives build for 2024.
Volatility in financial markets has increased as of late. For example, the Treasury market reflects levels of volatility not seen since the start of the pandemic in March 2020. The U.S. 30-year yield shifted by nearly 13 basis points (bps) per day for the five days leading to October 17th. The VIX, meanwhile, has risen to its highest measure since May as of October 17th.
That may speak to the demand for a low volatility ETF like FDLO. The strategy has added nearly $30 million in AUM over the last month up to October 17th, per VettaFi data. Intriguingly, much of that AUM growth is from fund flows rather than price influence alone. The ETF has added $39 million in flows over the same time frame. Together with performance, that has lifted FDLO close to $600 million in total AUM.
How Low Volatility ETF FDLO Approaches its Investments
FDLO tracks a proprietary index of large and mid-cap U.S. stocks, which seeks to find companies with low volatility of returns, stable earnings, and less sensitive to market movements. The Fidelity U.S. Low Volatility Factor Index includes around 100 securities. The ETF it underlies has done well YTD with its approach, returning 9% in that time as of mid-October. Those returns have helped it outperform its ETF Database Category and Factset Segment averages.
Per VettaFi, FDLO has seen just 9% volatility over 200 days, ranked 47 out of 121 members of its peer group ETF Database Category. Charging 29 bps, the strategy may intrigue those investors looking to overlay a low volatility strategy on top of a core allocation.
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