BlackRock Canada has announced that its iShares business has launched a suite of five minimum volatility ETFs to the Canadian marketplace. This is the first time investors in Canada have access to the full broad market suite of minimum volatility ETFs including Canada, US, developed international, global and emerging markets. All five of the ETFs have begun trading on the Toronto Stock Exchange.
“With the uncertainty in today’s markets, investors want to capture potential market upside but still protect their assets,” said Mary Anne Wiley, Managing Director, Head of iShares, BlackRock Canada.
“To help investors get off the sidelines, we have introduced the new iShares Minimum Volatility Funds which offer investors a unique opportunity to retain equity exposure in their portfolio while seeking to reduce the overall equity risk in these turbulent times. It’s a compelling option for investors looking for a contrast or complement to other portfolio management strategies and will also optimize risk-adjusted returns over the long term,” added Wiley.
BlackRock said the new offering was in direct response to investor demand and extends iShares current line-up of market-cap and fundamentally-weighted broad market product suites. The new iShares Minimum Volatility Funds can help investors reduce overall portfolio risk while retaining exposure to the equity marketplace.
The funds optimise risk-adjusted returns over the long term and recent studies have shown that, historically, minimum volatility portfolios have performed equally well, if not better, than the market while potentially lowering risk.
While the typical market portfolio seeks to balance risk by including exposures to higher and lower risk equities, minimum volatility ETFs seek to provide steady performance that helps insulate against spikes in returns.
The new ETFs are:
iShares MSCI Canada Minimum Volatility Index ETF (XMV)
iShares MSCI USA Minimum Volatility Index ETF (XMU)
iShares MSCI EAFE Minimum Volatility Index ETF (XMI)
iShares MSCI Emerging Markets Minimum Volatility Index ETF (XMM)
iShares MSCI All Country World Minimum Volatility Index ETF (XMW)
The ETFs track minimum volatility indices created by MSCI. These indices are constructed by optimising the respective parent MSCI indices, which are capitalisation-weighted, by determining weights for securities in the indices that result in portfolios with the lowest total risk.
Index constraints such as country, sector and style exposures are applied to the optimisation to ensure diversification and investability, while broadly matching the profile of the corresponding cap-weighted MSCI index. The new funds can help provide a portfolio with downside protection while seeking to maintain some exposure to the upside price movement.
“Minimum volatility ETFs are not just a tool to help shield investors from wild market swings, they can be used as a holding strategy in order to generate steady long-term growth,” said Oliver McMahon, Head of iShares Product Management at BlackRock Canada. “In general, we expect our suite of minimum volatility funds to deliver similar total returns to the underlying marketplace, but with lower volatility along the way. This suite of products is another innovative option within our family that increases investor’s flexibility and choice.”