USMV’s underlying index “seeks to create a holistic portfolio with lower risk than the market, without taking large individual stock or sector bets. This focus has historically facilitated more stable returns over time providing resilience when market returns are more erratic, or are suffering severe downside losses,” according to BlackRock.
Inside USMV ETF
USMV is higher by nearly 10% this year. The fund holds 213 stocks and has a three-year standard deviation of 9.43%, which is slightly below that of the S&P 500. Low volatility ETFs, such as USMV, are designed to perform less poorly when stocks falter, not capture all of the upside in strong trending bull markets.
“The Minimum Volatility strategy has delivered positive excess returns when the broad market has declined,” said BlackRock. “However, when the market posts monthly returns between 0% and 2%, the Index, on average, captured the market return. This dynamic, along with participation in up markets, has led the Index to capture 80% of the upside but only 62% of the downside of the S&P 500 since it was incepted.”
USMV allocates about 31% of its combined weight to technology and healthcare stocks while the financial services and consumer staples sectors combine for 24.50% of the fund’s weight. Investors have added $2.35 billion to USMV this year, a total exceeded by just nine other US-listed ETFs.
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