The low-volatility ETFs were designed to diminish portfolio volatility for investors pursuing long-term growth potential while providing positive exposure to potentially return-enhancing factors like value, momentum, quality and size.
LVUS tries to reflect the performance of the Hartford Multifactor Low Volatility US Equity Index, which tries to outperform a U.S. cap-weighted universe with up to one quarter less volatility over a complete market cycle.
LVIN tries to reflect the performance of the Hartford Multifactor Low Volatility International Equity Index, which is designed to outperform a capitalization-weighted universe of developed (ex-U.S.) and emerging markets with up to one quarter less volatility over a complete market cycle.
Moreover, the indices include other screens, including an optimization process that seeks diversification by applying minimum and maximum weightings of equity securities across a variety of measures, including sector, company, size, and other factors. The optimization process also seeks to avoid unintended factor risks by maintaining neutral to positive exposure to other potentially return-enhancing factors such as value, momentum, and quality at the portfolio level.
The low-volatility strategy is “designed to reduce risk at the core of a portfolio and to complement more aggressive components of an overall portfolio,” according to Hartford Funds.
For more information on alternative index-based strategies, visit our smart beta category.