When it comes to sector
, the proof is in the proverbial pudding regarding the risk off
tenor of the rally in U.S. equities.
Through April 1, the average year-to-date return for the low
beta trio comprised of the Consumer Staples Select Sector SPDR
), the Health Care Select Sector SPDR (NYSE:
) and the Utilities Select Sector SPDR (NYSE:
) was 14.2 percent compared to a 10.5 percent gain for the SPDR
S&P 500 (NYSE:
Overt bullishness towards those ETFs and rival funds
while materials lag
underscores the notion that investors have preferred more docile
fare as a means of getting exposure to equities.
There is further confirmation of that as minimum volatility
exchange traded products attracted $4.1 billion in new
investments in the first quarter. During the quarter, low or
minimum volatility ETPs raked in an average of $1.4 billion per
month, more than triple the average monthly inflow of $416
million seen in 2012,
according to iShares data
Of course past performance is not an indicator of future
returns, but the recent gains by some of the marquee U.S.-listed
"low vol" ETFs could be a sign that investors will continue to
embrace these funds over riskier products.
Through April 1, the iShares MSCI USA Minimum Volatility Index
) was up 13 percent year-to-date while the PowerShares S&P
500 Low Volatility Portfolio (NYSE:
) was up 12.8 percent. Obviously, those are two performances well
in excess of SPY's.
To that end, it is not surprising that SPLV, the king of low
volatility ETFs, has raked in $840.4 million in new assets this
year, making it the second-best PowerShares ETF in 2013 in terms
according to issuer data
USMV attracted $1.68 billion in new assets in the first
quarter, an inflow tally that ranks seventh among all the ETFs in
the world for the first three months of 2013, according to
iShares data. Combined, SPLV and USMV now have nearly $7 billion
in assets under management.
With investors favoring staples and health care names, it is
easy to see why they have embraced SPLV and USMV. The iShares
offering allocates more than 33 percent of its combined weight to
those two sectors. So does SPLV, though that ETF's largest sector
weight is 30.9 percent to utilities.
Low volatility ETFs also continue to show their mettle at the
emerging markets level. The iShares MSCI Emerging Markets Index
) is down 4.6 percent year-to-date. Compared to that, the 0.2
percent loss for both the iShares MSCI Emerging Markets Minimum
Volatility Index Fund (NYSE:
) and the PowerShares S&P Emerging Markets Low Volatility
) looks pretty good.
EEMV now has almost $1.8 billion in AUM, up from $1.6 billion
in late February. EELV has attracted $40.2 million in new capital
this year, bringing its AUM total to $129.2 million.
Like their U.S. equivalents, EELV and EEMV are heavy on
conservative sectors. Staples, telecom and utilities combine for
over a third of EELV's weight. Same goes for EEMV, indicating
that regardless of where investors put money to work this year,
U.S. or emerging markets, low beta/minimum volatility is a
preferred asset allocation strategy.
For more on ETFs, click
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