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ETFs to Minimize Volatility Amid Pausing Coronavirus Trials

Sweta Jaiswal, FRM
·5 mins read

The coronavirus pandemic is getting severe by the day as the total number of cases recorded globally has reached at least 38 million with a death toll of 1.08 million. United States, India and Brazil together account for the large part of the COVID-19 cases in the world. However, cases of infection reportedly started surging in Europe as well. Considering this grim scenario, it seems the remainder of 2020 will continue facing the brunt of this aggravating health crisis.

Further adding to the woes, major players in the race to develop coronavirus vaccine and antibodies announced pausing the trials. Johnson & Johnson (JNJ) recently halted dosing in all the clinical studies on its coronavirus vaccine candidate JNJ-78436735. The company also stalled its large pivotal phase III study ENSEMBLE, which began last month. According to sources, an unexplained illness observed in a study participant is being considered the reason behind the discontinuation. Notably, the ENSEMBLE independent Data Safety Monitoring Board and J&J’s own internal physicians are looking into the cause.

Notably, this is the second time that coronavirus vaccine trials were stopped for the same reason. Last month, AstraZeneca/Oxford University paused the global studies on their coronavirus vaccine candidate as a patient in the U.K. suffered an unspecified illness.

Escalating worries, Eli Lilly & Company (LLY) informed that the government-sponsored clinical trial of its COVID-19 antibody treatment LY-CoV555 is paused because of a safety concern, per reliable sources. Notably, the company applied for an emergency use authorization of its single monoclonal antibody therapy earlier this month.

The uncertainty surrounding the introduction of a coronavirus vaccine is unnerving investors. Going by the sources, Trump’s administration is believed to be building pressure on getting a vaccine approved before the elections in November. In fact, the FDA published new guidelines for the requirements of the much-awaited coronavirus vaccine’s emergency authorization after the advice to the pharmaceutical companies was delayed by the White House review, as sources reported. Analysts believe that the new FDA mandates might defer the urgent introduction of a coronavirus vaccine by the U.S. presidential elections.

Looking at the situation it looks like another round of stimulus will be absolutely mandatory to cushion the economy amid this prevalent health crisis. However, the hopes for another fiscal relied were also dashed after President Donald Trump tweeted “STIMULUS! Go big or go home!!!” on Oct 13, per a Yahoo Finance article.

Moving ahead, this election year could turn out to be the worst period with the coronavirus pandemic intensifying by the day. Historically, the stock markets are found to exhibit volatility in the month before the elections. Also, investors generally opt for cash or cash-like investments instead of risky assets like equities while evaluating the economic and the financial impact of the election results.

Low Volatility ETFs to the Rescue

Low-volatility products could be intriguing choices for those who want to continue investing in equities during the turbulent market conditions. Consider the following interesting options:

iShares MSCI USA Min Vol Factor ETF USMV

This fund offers exposure to 194 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 $33.80 billion, the product charges 0.15% in expense ratio (read: Defensive ETF Strategies for Q4 Amid Election Uncertainty).

Invesco S&P 500 Low Volatility ETF SPLV

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 amassed $8.68 billion in its asset base. It charges 25 basis points (bps) in annual fees (read: ETF Strategies to Fight the Rising Coronavirus Fears).

iShares MSCI EAFE Min Vol Factor ETF EFAV

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 269 securities. It accumulated $10.60 billion in its asset base. EFAV charges 20 bps in annual fees.

iShares MSCI Global Min Vol Factor ETF ACWV

The fund provides exposure to global stocks with potentially less risk. The fund tracks the MSCI All Country World Minimum Volatility Index and holds 384 securities. It has AUM of $5.81 billion and charges 20 bps in annual fees (read: 4 Safe ETF Bets as Global Stocks Tumble).

Invesco S&P 500 High Dividend Low Volatility ETF SPHD

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 51 securities. The fund has AUM of $2.31 billion and charges 30 bps in annual fees.

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iShares MSCI USA Min Vol Factor ETF (USMV): ETF Research Reports
 
Invesco SP 500 High Dividend Low Volatility ETF (SPHD): ETF Research Reports
 
iShares MSCI EAFE Min Vol Factor ETF (EFAV): ETF Research Reports
 
iShares MSCI Global Min Vol Factor ETF (ACWV): ETF Research Reports
 
Invesco SP 500 Low Volatility ETF (SPLV): ETF Research Reports
 
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