Low-volatility strategies are garnering greater interest, and the exchange traded fund industry has noticed. WisdomTree wants to test the space as it files to launch a Brazil country-specific, low-volatility fund.
According to a Securities and Exchange Commission filing, the WisdomTree Brazil Low Volatility Equity Fund will try to reflect the performance of the WisdomTree Brazil Low Volatility Equity Index, which is comprised of the 50 Brazilian companies that exhibit the best historical volatility, return on equity and return on assets of companies listed on the BM&FBOVESPA, Brazil’s primary stock exchange. [Low-Volatility ETFs: Strong Demand, Performance with Downside Protection]
The index is volatility weighted, so companies with lower historical volatility have a higher weighting. Sector weightings are capped at 25% and individual securities are capped at 3% of the overall index.
Sector exposure include consumer discretionary, consumer staples, energy, financials, health care, industrials, information technology, materials, telecommunication services and utilities.
The low-volatility ETF would be a new way to capture exposure to the expanding Brazilian markets. Investors can still browse through traditional market-cap index ETFs like the iShares MSCI Brazil Index Fund (EWZ) .
Low-volatility ETFs have been generating higher risk-adjusted returns, compared to the large stock market benchmarks. [Low-Volatility ETF Doubles S&P 500 Risk-Adjusted Return]
Despite the historically low VIX, investors are still mindful of volatility in the markets, taking a greater interest in low-volatility ETF options as people track broad markets with some downside protection. [Low-Volatility ETFs Still Hot Despite Collapsing VIX]
For more information on new product launches, visit our new ETFs category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
- historical volatility