When it comes to volatility
, meaning those funds that specifically track high or low
volatility equities, so called "low vol" funds have been the
dominant members of this space. Investors have clearly embraced
the PowerShares S&P 500 Low Volatility Portfolio (NYSE:
). Nearly $4 billion in assets under management indicates as
Other low volatility ETFs have flourished as well. Earlier
this year, iShares said its four-ETF suite of low volatility
funds crossed $4 billion in combined AUM. iShares, the world's
largest ETF sponsor, also noted that through February 19, low
attracted $900 million in assets since the start
of the year
Statistics like that might be enough to make investors what is
going on with high volatility ETFs or if such products even
exist. Indeed, there are a few "high vol" ETFs on the market
today and with cyclical sectors such as energy and financial
services continue moving to the upside, high volatility ETFs will
reward investors. Now could be the time to consider high vol
"Historically, the Consumer Discretionary, Materials, Energy,
Financials and Industrials sectors outperformed the S&P 500
in March over this period and four of the five (not Financials)
continued this success in April. In the initial days of March,
through March 8, this has held true to form with the Consumer
Discretionary, Financials and Materials sectors leading the more
defensive Consumer Staples and Utilities sectors," S&P
Capital IQ said in a new research note.
As a way of playing a continued high volatility resurgence,
S&P Capital IQ recommends the PowerShares S&P 500 High
Beta Portfolio (NYSE:
), which the firm rates Overweight. SPHB debuted on the same day
in May 2011 as SPLV did and to say the former has been
overshadowed by the latter is accurate. However, SPHB cannot be
characterized has small or illiquid.
The ETF has nearly $265 million in AUM and through 250 trading
days last year, SPHB never traded at premium or discount to its
net asset value of even 50 basis points,
according to PowerShares data
As investors would expect a low volatility ETF to be heavy on
low-beta sectors such as consumer staples and utilities, SPHB is
heavy on higher beta fare. Financials account for 25.6 percent of
the ETF's weight while technology names chime in at 20.6 percent.
The energy and materials sectors combine for over 28 percent.
"Despite SPHB's short history, we think the ETF offers a
diversified way to gain exposure to some of the cyclical sectors.
The ETF shows a number of favorable characteristics across our
proprietary performance, risk and cost factor analysis," said
S&P Capital IQ.
The research firm notes that it ranks five of SPHB's top-10
holdings Buy. Those names are Genworth Financial (NYSE:
), Morgan Stanley (NYSE:
), Helmerich & Payne (
), Masco (NYSE:
) and Nabors Industries (NYSE:
S&P Capital IQ said it views Mogan Stanley and Nabors as
undervalued. The firm also said two other SPHB top-10 holdings -
Allegheny Technologies (NYSE:
) and E-Trade (NASDAQ:
) are undervalued as well.
Given its tilt away from dividend sectors such as staples and
telecommunications, SPHB has a 30-day SEC yield of just 0.77
percent. However, the fund's expense ratio is favorable at just
0.25 percent per year. SPHB has outperformed the SPDR S&P 500
) by about 80 basis points year-to-date.
For more on ETFs, click
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