iShares has launched four minimum volatility ETFs designed to help investors manage risk in their portfolios. The new funds can help provide a portfolio with downside protection while seeking to maintain some exposure to the upside price movement.
The funds track the Emerging Markets, EAFE, USA and All Country World sub-index variants of the MSCI Global Minimum Volatility Index and are listed on the New York Stock Exchange (Arca).
Each MSCI Minimum Volatility Index is calculated using Barra Optimizer to optimize a given MSCI parent index for the lowest absolute volatility (variance) with a certain set of constraints. These constraints help maintain index replicability and investability and include index turnover limits, for example, along with minimum and maximum constituent, sector and/or country weights relative to the parent index.
“In today’s market environment, there is increased interest in managing risk and finding a solution via ETFs. Investors are seeking ‘smart beta’ solutions,” said Darek Wojnar, Head of iShares Product Development at BlackRock.
“The new iShares Minimum Volatility Funds can help investors to reduce overall risk in a portfolio while retaining equity exposures. These funds can provide a complement to the core passive portfolio, helping to optimize risk adjusted returns over the long term.”
The iShares ETFs will compete alongside similar US-based low-volatility products from rival providers, including the PowerShares S&P 500 Low Volatility Fund and the Russell 1000 Low Volatility ETF.
For Europe-based investors wishing to invest in low-volatility ETFs, they could consider the Ossiam iStoxx Europe Minimum Variance ETF or the Ossiam US Minimum Variance ETF, both of which are listed on Xetra and the London Stock Exchange.