SSgA SPDR unveils low-volatility Russell 1000 and Russell 2000 ETFs

Feb 21st, 2013 | By | Category: Equities

State Street Global Advisors (SSgA) has announced the launch of the SPDR Russell 1000 Low Volatility ETF (LGLV) and the SPDR Russell 2000 Low Volatility ETF (SMLV) on the NYSE Arca. The new exchange-traded funds (ETFs) are designed to provide investors with exposure to large-cap and small-cap US equities, respectively, with reduced risk.

SSgA SPDR unveils low-volatility Russell 1000 and Russell 2000 ETFs

James Ross, global head of SPDR ETFs (pictured centre front).

The funds are based on low-volatility versions of the widely followed Russell 1000 and Russell 2000 indices, which measure the performance of the large-cap and small-cap segments of the US equity market.

The SPDR Russell 1000 Low Volatility ETF is linked to the Russell 1000 Low Volatility Index, while the SPDR Russell 2000 Low Volatility ETF is linked to the Russell 2000 Low Volatility Index. These indices are designed to give investors an efficient way to gain exposure to certain market-cap segments with lower total return variability.

The indices are composed of a selection of low-volatility stocks from their respective parent indices, based on volatility over the previous 252 trading days. The stocks are then weighted inversely to their volatility and optimised to provide less volatile exposure while managing turnover and neutralising other factors, such as beta and momentum.

The indices have historically delivered lower volatility than their parent indices and smoother performance over time, resulting in strong long-term risk-adjusted returns. Consequently, the strategies offer investors a way to potentially help manage portfolio risk while maintaining strategic equity market allocations.

James Ross, senior managing director and global head of SPDR ETFs at SSgA, said: “Our new low-volatility SPDR ETFs were developed in response to increasing demand from investors looking to improve the risk-adjusted returns of their portfolio, increase their equity allocation while maintaining downside protection, or tactically take a more defensive approach to the US large-cap or small-cap markets.”

Rolf Agather, managing director of index research and innovation for Russell Investments, added: “The Russell Low Volatility Indexes draw on Russell’s objective, rules-based, transparent index methodology to help investors construct a focused portfolio of stocks with lower volatility than their parent Russell 1000 and Russell 2000 Indexes. In addition, when used as the basis for investable products such as ETFs, the Russell Low Volatility Indexes may help lower the overall volatility of investors’ equity portfolios.”

The ETFs have been priced competitively – the SPDR Russell 1000 Low Volatility ETF has an annual expense ratio of 0.20%, while the SPDR Russell 2000 Low Volatility ETF comes in at 0.25%.

The launch of these funds comes just over a week after Invesco PowerShares expanded its suite of low-volatility products with the launch of two new ETFs covering the US mid-cap and small-cap segments: the PowerShares S&P MidCap Low Volatility Portfolio ETF (XMLV) and PowerShares S&P SmallCap Low Volatility Portfolio ETF (XSLV). This suite also includes the hugely popular PowerShares S&P 500 Low Volatility Portfolio ETF (SPLV) tracking low-volatility large-cap stocks.

UK and European investors looking for low-volatility ETFs are served by products from Ossiam, iShares and SSgA SPDRs.

Tags: , , , , , , , , , ,

Leave a Comment



More in Equities
BlackRock planning active US sector ETFs
BlackRock planning active US sector ETFs

The world’s largest ETF provider, BlackRock, is planning to launch a number of active US equity sector ETFs managed by sophisticated algorithms. Filings...

Horizons enters partnership with Cadence to launch active ETFs
Horizons enters partnership with Cadence to launch active ETFs

Horizons ETFs Management US has entered into a strategic partnership with Cadence Capital Management to develop a series of actively managed ETFs due...

Close