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Do Low Volatility Funds Actually Protect In Downturns?

TedTed
in Fund Discussions
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

Comments

  • 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}
  • davidrmorandavidrmoran
    @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
  • davidrmorandavidrmoran
    edited June 2016
    I bought lots of SPY today, way early :(
  • Chinfist
    edited June 2016
    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
    edited June 2016
    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.
  • BobCBobC
    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.
  • BenWPBenWP
    XMLV has held up well the last two trading days.
  • Ralph
    TEDIX/MDISX fell 4.50%
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