Low Volatility ETFs
A low volatility ETF screens its potential holdings based on the volatility of the market price or the volatility of the returns of the stock. Low volatility ETFs select more securities that have lower volatility than average. Although low volatility ETFs can outperform the market, low volatility ETFs are not necessarily designed to outperform the market. Rather, they attempt to appeal to investors who prefer less volatility. Certain investors are willing to give up a little return for a more consistent, stable return.
There are a large number of low volatility ETPs, as shown in this table:
| Name | Symbol | Last price | Currency | AUM | Expense ratio, % | Inception date |
|---|---|---|---|---|---|---|
| iShares MSCI USA Min Vol Factor ETF | BATS:USMV | 90.94 | USD | 23,666,973,653 | 0.15 | Oct 20, 2011 |
| Invesco S&P 500 Low Volatility ETF | ARCX:SPLV | 71.08 | USD | 7,493,711,280 | 0.25 | May 05, 2011 |
| iShares MSCI EAFE Min Vol Factor ETF | BATS:EFAV | 71.84 | USD | 5,912,591,880 | 0.20 | Oct 20, 2011 |
| iShares MSCI Global Min Vol Factor ETF | BATS:ACWV | 110.76 | USD | 4,232,776,100 | 0.20 | Oct 20, 2011 |
| iShares MSCI Emerging Markets Min Vol Factor ETF | BATS:EEMV | 58.53 | USD | 4,224,295,440 | 0.25 | Oct 20, 2011 |
| Fidelity Low Volatility Factor ETF | ARCX:FDLO | 61.79 | USD | 1,298,651,702 | 0.16 | Sep 15, 2016 |
| Invesco S&P MidCap Low Volatility ETF | XNYS:XMLV | 60.26 | USD | 828,261,680 | 0.25 | Feb 15, 2013 |
| SPDR SSGA US Large Cap Low Volatility Index ETF | ARCX:LGLV | 169.54 | USD | 814,860,000 | 0.12 | Feb 20, 2013 |
| Invesco S&P Emerging Markets Low Volatility ETF | ARCX:EELV | 23.97 | USD | 414,328,000 | 0.29 | Jan 13, 2012 |
| Invesco S&P SmallCap Low Volatility ETF | XNYS:XSLV | 46.43 | USD | 323,917,680 | 0.25 | Feb 15, 2013 |
| iShares MSCI USA Small-Cap Min Vol Factor ETF | BATS:SMMV | 42.21 | USD | 320,254,802 | 0.20 | Sep 09, 2016 |
| Invesco S&P International Developed Low Volatility ETF | ARCX:IDLV | 28.50 | USD | 254,900,800 | 0.25 | Jan 13, 2012 |
| SPDR SSGA US Small Cap Low Volatility Index ETF | ARCX:SMLV | 130.60 | USD | 219,480,000 | 0.12 | Feb 20, 2013 |
| Timothy Plan US Small Cap Core ETF | ARCX:TPSC | 40.33 | USD | 146,400,000 | 0.52 | Dec 03, 2019 |
| Timothy Plan International ETF | ARCX:TPIF | 27.46 | USD | 108,813,000 | 0.62 | Dec 03, 2019 |
| THOR Equal Weight Low Volatility ETF | XNYS:THLV | 27.55 | USD | 69,051,500 | 0.64 | Sep 13, 2022 |
| ETRACS 2x Leveraged MSCI US Minimum Volatility Factor TR ETN | ARCX:USML | 39.88 | USD | 37,034,000 | 0.95 | Feb 09, 2021 |
| Emerging Markets Equity Select ETF | XNAS:RNEM | 49.62 | USD | 18,404,155 | 0.75 | Jul 10, 2017 |
Keep in mind that investors that use the Sharpe Ratio to build and analyze portfolios will tend to favor low volatility ETFs. The Sharpe Ratio rewards low volatility ETFs, because a low volatility ETF that generates the same return as its benchmark will have a higher Sharpe Ratio. Here are the lifetime Sharpe Ratios for USMV and SPLV (i.e. Sharpe Ratios calculated using the lifetime of the ETFs), compared to the Sharpe Ratio of SPY during the same matching periods:
Since these ETFs have higher Sharpe Ratios, it means they have outperformed SPY on a risk adjusted basis.