Do Low Volatility Funds Actually Protect In Downturns?

Ted

FYI: Low volatility funds have been hot, hot, hot — the top two domestic based ETFs in the category, USMV and SPLV, now have over $20 billion in assets between them, of which $8 billion has come in during the last six months (40 percent of total AUM).

At first glance, this popularity is understandable: the concept is straightforward and logical, the pitch is compelling and risk-adjusted performance has been strong.
Regards,
Ted
http://wealthmanagement.com/print/etfs/do-low-volatility-funds-actually-protect-downturns

rforno

We'll see how my VMVFX holds up this evening. It did quite well during the China swoon in January, so we'll see how it does now.

DanHardy

It doesn't look that much different then the s&p.
http://finance.yahoo.com/echarts?s=USMV+Interactive#{"range":"max","allowChartStacking":true}

davidrmoran

@DanHardy

For the last 3/2/1y they sure do; check growth of $10k at M* vs say SPY.
Graphs I just looked at do not reflect today, though.

MikeM2

ITOT (a total stock market etf) was down about 1% more than USMV. A cleaner dirty shirt.
There will probably be more selling Monday so who knows

davidrmoran

I bought lots of SPY today, way early

Chinfist

My low volatility funds for 6/24: BLVAX was down 2.08%, VMVFX down 2.52%, JRSTX ("managed" volatility fund) was down 1.26%, and I'll throw GDMZX in the group (defensive strategy fund) which was down 2.27%. Given the S&P 500 was down 3.59%, I'm not too disappointed with how they performed. I was concerned VMVFX was going to go down more than it did as it is a global fund, and foreign markets got pummeled.

BrianW

ARIVX (up .09%), ICMTX (down 2.30%), AUENX (down 2.57%)

rforno

ARIVX isn't really a fair comparison here - it's like 88% in cash, according to M*. With a 1.42ER as well.

msf

Part of VMVFX's outperformance (relatively speaking) can be attributed to the fact that it is currency hedged. To put this in perspective, TBCUX fell 5.17%, while TBGVX fell "just" 3.51%. Still significantly more than VMVFX, but a lot closer than its unhedged sibling.

"ARIVX isn't really a fair comparison here - it's like 88% in cash, according to M*."

That's true so far as comparing the magnitudes of the changes (i.e. mostly cash by definition dampens volatility). But the fact that the change was positive speaks to the portfolio. Specifically, that its top three holdings (half of its non-cash) are in gold and silver.

BobC

Most do a decent job. Domestic tend to do a better job than international. YTD, SPHD looks darned good.

willmatt72

BobC said:

Most do a decent job. Domestic tend to do a better job than international. YTD, SPHD looks darned good.

I've owned SPHD for about a year now. Pretty darned good is right. I also like USMV for lower volatility.

BenWP

XMLV has held up well the last two trading days.

Ralph

TEDIX/MDISX fell 4.50%