Market rallies often have at least a few doubters and plenty
of late arrivals to the party. Investors that fall into either
category do have some options, though,
including highly popular low volatility ETFs
However, conventional wisdom holds that those looking to skirt
volatility should also look to avoid international equities.
Although this may surprise some investors, there several
compelling options among global
that have fairly low betas when measured against the S&P 500.
In fact, some of these ETFs already rank among 2013's top
As WisdomTree Research Director Jeremy Schwartz points out in
a new research note, currency hedging has been a prominent theme
in 2013. That much is highlighted by the astronomical asset
growth of the WisdomTree Japan Hedged Equity Fund (NYSE:
The assertion is also fortified by the
returns offered by DXJ and some comparable
Year-to-date, DXJ has gained over 16 percent. The WisdomTree
Europe Hedged Equity Fund (NYSE:
) has also been solid, at least as far Europe ETFs go. HEDJ is up
5.7 percent year-to-date and has seen decent inflows since last
August when it converted to hedged play on European dividend
payers with a euro hedge.
DXJ and HEDJ have betas of 0.66 and 0.71, respectively,
according to WisdomTree data
. DXJ's beta of 0.66 is barely higher than what the Consumer
Staples Select Sector SPDR (NYSE:
) sports. XLP's beta is 0.63,
according to State Street data
Another low-beta ETF option for investors might come as a
surprise given its focus on small-caps, that being the WisdomTree
Japan SmallCap Dividend Fund (NYSE:
). DFJ and its rival Japan small-cap ETFs have
have followed DXJ higher as the yen has
Actually, over the past month, DFJ has established a
leadership position among Japan ETFs. The fund has gained 9.5
percent over that time, making it one of the better ways to have
played Japan since mid-February. Despite the small-cap bias, DFJ
has a beta of just 0.36 against the S&P 500.
The inclusion of the WisdomTree Middle East Dividend Fund
) is potentially the real surprise here, but the ETF has the same
beta as the Consumer Staples Select Sector SPDR.
Investing in the Middle East does expose investors to
geopolitical volatility, but GULF allocates a combined 63 percent
of its weight to the United Arab Emirates and Qatar, two of the
region's more stable nations.
Additionally, investors are compensated for the perceived
risks with GULF as the ETF has a 30-day SEC yield of 4.18
according to WisdomTree data
Worth noting is the fact that most of GULF's country
allocations have frontier markets designation. While that may
imply a higher level of volatility than what investors get with
frontier markets offer historically low
correlations to U.S. stocks
, giving investors the advantage of some upside potential should
the S&P 500 decline.
GULF "offers strong diversification potential relative to
developed markets in that it is exposed to many factors unique to
that region of the world," said Schwartz.
GULF has returned more than nine percent this year.
For more on ETFs, click
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