One timely way to de-risk client portfolios is by allocating U.S. equity investments to lower volatility companies. However, unsophisticated application of the low volatility factor in large caps can leave investors prone to several pitfalls.
On the upcoming webcast, De-Risk U.S. Equities with a Unique Low-Volatility Approach, Paul Kim, Managing Director – Head of ETF Strategy, Principal Global Investors; Jeffrey Schwarte, Portfolio Manager, Principal Global Equities; Robert Hughes, Head of Nasdaq Investment Solutions, Nasdaq Global Indexes; and Matthew Cohen, Head of Principal ETF Specialist Team, Principal Global Investors, will introduce you to a de-risking strategy allowing you to continue participating in the broad equity market.
Specifically, smart beta or factor-based strategies may be one way for investors to hedge risks. For example, the Principal U.S. Mega-Cap Multi-Factor Index ETF (NasdaqGM: USMC) is comprised of companies with the largest market capitalization taken from the Nasdaq U.S. 500 Large Cap Index and screened based on a quantitative model. USMC is a multi-factor fund, an increasingly popular strategy within the broader smart beta universe.
USMC’s underlying index utilizes a modified equal-dollar weighting methodology where securities in the top 10% of aggregate market capitalization are weighted by market cap, but securities of the remaining companies are equally weighted and, in certain cases, weights are adjusted to emphasize stocks with lower historical volatility and de-emphasize stocks with higher historical volatility.
The ETF can potentially provide investors a systematic tilt toward lower historical volatility as a way to offer more stability and better downside protection, along with a highly focused, yet risk-aware, exposure to mega-cap in an attempt to help investors generate better risk-adjusted returns over the long haul.
Principal Global Investors also offers an expanded suite, including the Principal U.S. Large-Cap Multi-Factor Core Index ETF (PLC), Principal U.S. Small-Mid Cap Multi-Factor Core Index ETF (PSM), Principal U.S. Small-Cap Multi-Factor Index ETF (PSC), and Principal International Multi-Factor Core Index ETF (PDEV).
Financial advisors who are interested in learning more about low-volatility strategies can register for the Tuesday, March 24, webcast here.