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How are low volatility ETFs holding up?

Over the past 5+ years a variety of low volatility equity ETFs have launched with rapid growth. In light of the recent market volatility, how are the funds holding up? The top three are listed below and have a combined AUM of $24 billion:

  • SPHD – PowerShares ETF S&P 500 High Div Low Vol
  • SPLV – PowerShares ETF S&P 500 Low Volatility
  • USVM – iShares ETF MSCI USA Minimum Volatility

The FT Cloud SpreadSheet below highlights that the dividend adjusted stand deviations are in fact lower than SPY. So, the funds are producing the described lower volatility.

But what do we think about recent max drawdown numbers and the trailing 12 month returns? The picture below highlights the trailing 12 months total returns and recent draw down. While the ETFs are producing only 80-90% of SPY’s monthly volatility, they’re producing 90%+ of the drawdowns and a mere 20-80% of the returns.

Over the longer term (3 year, 5 year, and common start date), the ETFs are showing consistent lower SD while maintaining comparable annualized returns. See the three year, 5 year, and common start date views below.

Are these worth holding in your portfolio? We’ve love to hear your thoughts.

Three Years (Feb 2015- Feb 2018)

Five Years Feb (2013- Feb 2018)

Common Start (Oct 2012- Feb 2018)

One Year Total Return (Feb 2017 – Feb 2018)

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