Taking Volatility Out of Emerging Markets Trade

Many investors like the idea of removing some of the volatility from the emerging markets equity trade, but leaving returns on the table is not appealing.

However, the PowerShares S&P Emerging Markets Low Volatility Portfolio (NYSEArca: EELV) is impressing with a year-to-date return of more than 13%.

Now more than five years old, EELV is one of the most venerable names among emerging market low volatility exchange traded funds, a fact confirmed by its more than $252 million in assets under management. EELV tracks the S&P BMI Emerging Markets Low Volatility Index, which is a collection of the 200 stocks from the S&P Emerging BMI Plus LargeMid Cap Index with lowest trailing 12-month volatility.

Extensive research has gone over the so-called low-volatility anomaly. As a more conservative strategy, low-volatility investments are expected to provide investors with smaller swings and more boring returns. However, the strategy has historically outperformed with higher risk-adjusted returns.

The weaker dollar could be helping EELV and emerging markets stocks this year.