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What You Need to Know About Low-Volatility Funds (Part 1)

Low-volatility strategies are at their best when markets are at their worst.

Ben Johnson 14 July, 2021 | 8:00
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Low-volatility exchange-traded funds aim to give investors a smoother ride in stock markets. Being long stocks with less risk is a compelling proposition. So it’s little surprise that these funds have been popular. Over the trailing five years through February 2020, investors poured a combined US$30.2 billion of their hard-earned savings into U.S. large-cap ETFs in the U.S. that focus on dialing down volatility. This represented 306% organic growth over that three-year stretch. But the early-2020 market meltdown and subsequent rebound have put them to the test, and many investors have gotten spooked. These funds saw US$18.1 billion in net outflows from March 2020 through May 2021.

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About Author

Ben Johnson  Ben Johnson, CFA is the Director of Passive Fund Research with Morningstar.

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