Global asset management firm, American Century Investments, has introduced an offering in the low-volatility product range. The firm has launched its first actively-managed low volatility ETF (LVOL) on the New York Stock Exchange (NYSE) Arca. In this regard, Ed Rosenberg, head of ETFs for the firm, has reportedly said, “we have the opportunity to offer an ETF that has the objective of tempering volatility using our proprietary active methodology. Because LVOL is actively managed, it will enable a nimble approach that can adapt to quantitative insights and challenging market conditions."
Notably, in April 2020, American Century Investments stood out to be the first asset manager to introduce two actively managed, semi-transparent ETFs using Precidian Investments' ActiveShares methodology: American Century Focused Dynamic Growth ETF (
FDG Quick Quote FDG - Free Report) and American Century Focused Large Cap Value ETF ( FLV Quick Quote FLV - Free Report) . LVOL in a Nutshell
The fund uses an actively-managed strategy. It seeks to track the market over longer term, while realizing less volatility, particularly during downturns. The fund’s managers use quantitative models to select securities with strong fundamentals that they expect will provide returns that will reasonably track the market over the long term, while seeking less volatility. The fund will also expand risk measures beyond volatility to cover other downside and balance sheet risks. It charges an expense ratio of 0.29%.
LVOL’s top three holdings are Alphabet Inc, Apple Inc and Amazon.com Inc, with 3.11%, 2.71% and 2.70% exposure, respectively.
What Makes LVOL an Attractive Pick?
Low-volatility products could be intriguing choices for those who want to continue investing in equities during turbulent market conditions. The globally aggravating coronavirus outbreak and efforts to combat the spread can weigh on the global economic recovery achieved so far.
Meanwhile, the inoculation process among people has kicked off but is being carried out at a slightly slower pace, which is a little worrisome. WHO’s chief scientist Dr. Soumya Swaminathan has cautioned that herd immunity will not be attained in 2021 despite the ongoing inoculation process and social-distancing measures will need to be adhered to, per a CNN report. In the meantime, the ongoing political turmoil in Washington following violence at Capitol Hill has kept investors on edge.
The fund faces tough competition owing to its focus on low volatility. Below we discuss a few ETFs that seek to realize less volatility:
iShares MSCI USA Min Vol Factor ETF ( USMV Quick Quote USMV - Free Report)
This fund offers exposure to 185 U.S. stocks with lower volatility characteristics than the broader U.S. equity market by tracking the MSCI USA Minimum Volatility Index. With AUM of $31.29 billion, the product charges 0.15% in expense ratio (read:
Defensive ETF Strategies for Those Fearing a Market Meltdown). iShares MSCI EAFE Min Vol Factor ETF ( EFAV Quick Quote EFAV - Free Report)
EFAV looks to replicate the performance of international equity securities that have lower risk. The fund tracks the MSCI EAFE Minimum Volatility (USD) Index and holds 257 securities. It has accumulated $10.52 billion in its asset base. EFAV charges 20 basis points (bps) in annual fees.
Invesco S&P 500 Low Volatility ETF ( SPLV Quick Quote SPLV - Free Report)
This ETF provides exposure to stocks with the lowest realized volatility over the past 12 months. It tracks the S&P 500 Low Volatility Index and holds 102 securities in its basket. SPLV has amassed $8.13 billion in its asset base. It charges 25 bps in annual fees (read:
ETFs to Counter Georgia Senate Runoffs-Induced Volatility). iShares MSCI Global Min Vol Factor ETF ( ACWV Quick Quote ACWV - Free Report)
The fund provides exposure to global stocks with potentially less risk. The fund tracks the MSCI All Country World Minimum Volatility Index and holds 380 securities. It has AUM of $5.73 billion and charges 20 bps in annual.
Invesco S&P 500 High Dividend Low Volatility ETF ( SPHD Quick Quote SPHD - Free Report)
The fund seeks investment results that generally correspond (before fees and expenses) to the price and yield of the S&P 500 Low Volatility High Dividend Index. It holds 50 securities. The fund has AUM of $2.61 billion and charges 30 bps in annual fees.
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