, one of the fastest-growing segments of the exchange-traded
products universe, continue to gain favor with analysts and
investors alike. Even with the S&P 500 within earshot of its
2007 highs, investors continue to put cash to work in low
"According to BlackRock, in the first two months of 2013, the
34 low or minimum volatility exchange traded products gathered on
average $926 million in new assets each month, more than double
what was added to them a year earlier," S&P Capital IQ said
in a new research note.
Those inflows have benefited several "low vol" ETFs, including
the highly popular PowerShares S&P 500 Low Volatility
). On Monday, PowerShares announced that SPLV
crossed the $4 billion in assets under management
. SPLV, the largest low volatility ETF assets, took just 22
months to reach $4 billion in AUM.
In the event of a market pullback, the allure of low
volatility becomes clear and S&P Capital IQ pointed to some
key statistics that highlight that point.
"For example, the S&P 500 Low Volatility Index (Low Vol)
was down just 21.4% in 2008, compared to the 37.0% decline in the
S&P 500 Index. In 2010, Low Vol was up 13.4%, vs. 15.1% in
the broader index. But then in 2011, Low Vol Index rose 14.8%
versus the 2.1% gain for the S&P 500 Index. In the five-year
period ended February 2013, Low Vol's total return was 9.4%, much
higher than 4.9% for the S&P 500 Index, while its standard
deviation was 12.5 much lower than the 18.9 for the S&P 500
Index," according to the research firm.
Through the end of 2012 since its May 2011 debut, SPLV
outpaced the S&P 500 by more than 500 basis points,
according to PowerShares data
. SPLV also features a monthly dividend and is rated Overweight
by S&P Capital IQ.
The ETF's top-five holdings are Johnson & Johnson (NYSE:
), H.J. Heinz (NYSE:
), PepsiCo (NYSE:
), Clorox (NYSE:
) and General Mills (NYSE:
S&P Capital IQ also highlighted the iShares MSCI USA
Minimum Volatility Index Fund (NYSE:
) in the note. USMV, which S&P rates Marketweight, is SPLV's
chief rival among domestically-focused low volatility and now has
almost $2 billion in AUM.
USMV is home to more stocks than SPLV (126 for the former and
100 for the latter). However, arguably the biggest difference
between the two funds is fund at the sector level. SPLV allocates
nearly 55 percent of its weight to the utilities and staples
sectors while those two industry groups represent just 24 percent
of USMV's weight.
Top holdings in USMV include Bristol-Myers Squibb (NYSE:
), McDonald's (NYSE:
), General Mills and Verizon (NYSE:
"All told, USMV is more diversified at the sector level than
SPLV, but has less exposure to traditionally defensive sectors
that typically hold up best in volatile markets. Both are
inexpensive, by our analysis, and hold stocks that S&P
Capital IQ views as incurring less risk. For investors looking to
stay invested but hoping to reduce their risk profiles, we think
both SPLV and USMV are worth further scrutiny," said S&P
For more on ETFs, click
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