ETF Of The Month
Issue April – May 2012
PowerShares S&P 500 Low Volatility ETF
Replication method: Full
AuM: 1,615 mm
52-Week Range: 21.74 – 36.56
The PowerShares S&P 500 Low Volatility Portfolio is based on the S&P 500 Low Volatility Index. The Index is compiled, maintained and calculated by Standard & Poor’s and consists of the 100 stocks from the S&P 500 Index with the lowest realized volatility over the past 12 months. Volatility is a statistical measurement of the magnitude of up and down asset price fluctuations over time.
In the last couple of weeks we have seen a very positive trend for stocks worldwide. The rally was mainly led by cyclical sectors. Such an environment isn´t the best for low volatility strategies, because they tend to favor defensive industries like consumer staples. So the SPLV underperformed the S&P 500 year to date. But with round about 12% in three month in the S&P 500 the rally could have been too strong. With a decreasing momentum time could be right for low volatility strategies. Since its inception in May 2011 the PowerShares S&P 500 Low Volatility ETF outperformed the S&P 500 by round about 3.5%. This outperformance was primarily generated in the volatile markets in the second half of 2011. All in all low volatility strategies are a good investment in volatile markets but should underperform in strong equity market rallies. But the true test will be how they perform over more than a full market cycle.
Copyright © 2012 Chart and Market data: Yahoo! Inc. and data vendors. Analysis: ETF Radar Global Research. All rights reserved. This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only current as of the stated date of their issue.