“In addition, VictoryShares volatility weighted ETFs invest only in profitable companies (as measured by four quarters of positive earnings), potentially eliminating those that might initially be more susceptible to a drawdown during a market correction,” he said.
This focus on diversification through a volatility weighted approach is particularly relevant in light of several external forces in motion today. When you consider today’s geopolitical risks, legislative uncertainty and the fact that very few experts say today’s market is cheap, we think diversified exposure to the market makes a lot of sense.
Related: A Min Volatility ETF That Starts with a Quality Approach
The VictoryShares volatility weighted approach differs from competing methodologies that invest in low volatility companies. Instead, the indexes use volatility as a weighting mechanism to seek to achieve broad-market diversification. Over the past three years, Victory Capital has extended the approach beyond the US broad market to provide investors with volatility weighted solutions that seek to provide exposure to high dividends as well as international and emerging markets.
Beyond the U.S., country and currency concentration and risk can dominate performance in overseas markets, Mannik said.
“Taking a quality view of only investing in what we believe to be profitable companies, and diversifying across them based on how the market has assigned risk, can provide diversification to help navigate developed and emerging markets,” he said.
Mannik said the diversification that volatility weighting delivers not only allows it to serve as a core allocation; it can sit alongside the cap-weighted counterparts in all geographies as a complement as well.
Related: Why ETF Investors Look to Dividend Growth as a Portfolio Diversifier
The VictoryShares ETF platform, which has grown to approximately $1.7 billion in AUM as of July 31, 2017, is designed to provide investors with rules-based solutions that help bridge the gap between the active and traditional passive elements of their portfolios.
In addition to its suite of volatility weighted ETFs, the VictoryShares platform includes two recently launched ETFs: the VictoryShares Dividend Accelerator ETF (VSDA) and the VictoryShares US Multi-Factor Minimum Volatility ETF (VSMV). Both ETFs track indexes developed in partnership with Nasdaq.
Visit www.victoryshares.com for more information.