Twelve For '12: Volatility ETFs to Watch In The New Year
Published on Thursday, 29 December 2011 17:02 Written by ETF Professor
One of the more interesting themes regarding new ETFs to hit the market in 2011 has been the emergence of volatility ETFs.
Some give investors exposure to high beta fare while others focus on lowering volatility to appeal to more conservative investors.
Regardless of a volatility ETF's objective, it is clear investors like these ETFs and there is now a volatility ETF for all seasons. Let's examine 12 volatility funds that are worth watching in the year ahead.
EGShares Emerging Markets High Income/Low Beta ETF (NYSE: HILO)
Considering that 2011 has been a tough year for emerging markets, HILO is off to a nice start. The ETF is down about 5% since its August debut, but the combination of dividends and a low volatility emerging markets play has proven alluring as investors have poured over $19 million into the ETF and average daily volume is just under 31,200 shares. HILO is one of the preferred low volatility EM options for 2012.
Russell 1000 Low Volatility ETF (NYSE: LVOL)
There's a lot to like about this ETF – for one, a low expense ratio (0.2%). The ETF is home to 103 blue chip stocks - none receive a weight greater than 2.15%. The ETF has garnered $34.5 million in AUM since its late May debut. If 2012 is another year where defensive sectors such as staples and utilities thrive, that will be good for LVOL as those two sectors account for over 43% of the ETF's weight.
Russell Dev ex-U.S. Low Volatility ETF (NYSE: XLVO)
The search for "low vol" ETFs should not be confined to the U.S. and for those looking to emphasize developed markets, XLVO is one ETF to look at. The good news is that the top five country weights – the U.K., Japan, Canada, Switzerland and Australia – are not Euro Zone nations. The bad news is over 18% of the ETF's sector goes to financials.
Russell 2000 Low Beta ETF (NYSE: SLBT)
Another new volatility play from Russell Investments, SLBT holds over 370 stocks and is designed to give investors exposure to the lowest beta members of the Russell 2000 Index. As such, SLBT's beta against the Russell 3000 is just 0.87.
iShares MSCI Emerging Markets Minimum Volatility Index Fund (NYSE: EEMV)
Just over two months old, EEMV has proven to be one of the more successful new EM ETFs to come to market this year having hauled in almost $30 million in AUM. The expense ratio is favorable at 0.25%, but an almost 21% allocation to financials might not be for all investors. While EEMV is a "low vol" play, it's similar to many multi-country EM ETFs in that Taiwan, China and Brazil figure prominently in the country mix. In this case, that trio gets over 41% of EEMV's weight.
iShares MSCI All Country World Minimum Volatility Index Fund (NYSE: ACWV)
Maybe you just need more. More countries and more stocks that is. ACWV is home to 280 stocks. The country allocations are divided among non-Europe developed markets and Asian emerging markets, but be advised the U.S. gets an allocation of over 49%.
PowerShares S&P 500 Low Volatility Portfolio (NYSE: SPLV)
Let's illustrate how successful SPLV has been among new ETFs in 2011. When wrote about this ETF on October 20, it had just over $432 million in AUM. Today, the PowerShares Web site says the ETF has $819.2 million in AUM. SPLV could be your grandfather's favorite ETF. A low expense ratio at 0.25% and utilities and staples combining for 62% of the ETF's weight make it a conservative investor's dream.
PowerShares S&P 500 High Beta ETF (NYSE: SPHB)
SPLV has a "high vol" cousin in the form of the PowerShares S&P 500 High Beta ETF. With $29.2 million in AUM, SPHB can't tough its low volatility in terms of size, but that's a decent total for a new ETF. An almost 34% weight to financials means that group will have to get its act together to make 2012 a profitable one for SPHB.
Russell 2000 High Volatility ETF (NYSE: SHVY)
The Russell 2000 High Volatility ETF fits the bill as good for traders looking to position themselves for a rebound in small-caps. HVY is home to almost 380 stocks and features large weights to financials, technology, consumer discretionary and health care names.
Russell 1000 High Volatility ETF (NYSE: HVOL)
Or perhaps you prefer the comfort of large caps to go along with your high-beta ETF. We recommend the Russell 1000 High Volatility ETF. We'd like the ETF even more if a third of its sector weight was NOT devoted to financials. At least the energy and tech holdings are familiar and high quality.
iShares MSCI EAFE Minimum Volatility Index Fund (NYSE: EFAV)
EFAV is just over two months old, but there are signs this ETF will be around a long time. Longer-term investors can enjoy the 0.2% expense ratio. Diversification advocates will like the fact that EFAV has double-digit weights to six sectors. Just be advised that five Euro Zone countries account for about 16% of the new ETF's country weight.
Russell 1000 High Beta ETF (NYSE: HBTA)
Yes, "high beta" is in this ETF's name, but when you dig deeper into it's holdings, this ETF is more brisk jog than skydiving. Most of HBTA's holdings are of the blue chip variety, so this ETF actually has wider appeal than its name implies.
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