A Smart Beta Dividend ETF Rapidly Adding Assets

An increasingly popular smart beta strategy is the combination of low volatility and high-dividend stocks under the umbrella of one ETF. That helps explain why the Legg Mason Low-Volatility High-Dividend ETF (LVHD) is one of this year's fastest-growing ETFs. LVHD debuted in late 2015 and is one of three dividend/low volatility ETFs from Legg Mason. LVHD’s portfolio “is constructed of the highest scoring securities subject to concentration limits: no individual component of the Index will exceed 2.5%, no individual sector (as defined by QS) will exceed 25%, and real estate investment trust (“REIT”) components as a whole will not exceed 15%. The number of component securities in the Index is anticipated to range from 50 to 100,” according to Legg Mason. LVHD is up nearly 7% year-to-date and sports a trailing 12-month dividend yield of almost 3.2%. That is well above what investors will find on the S&P 500 or 10-year Treasuries. Its yield could be one reason why LVHD is so rapidly adding assets. At the start of this year, LVHD had $108.5 million in assets under management. As of Sept. 14, that number had swelled to $387.7 million, meaning the ETF has experience asset growth of over 250% this year. Only four ETFs have posted larger jumps in assets in percentage terms, according to Bloomberg data. LVHD's strategy has proven to help investors capture growing markets while limiting drawdowns during periods of increased volatility to generate improved risk-adjusted returns over the long haul. Related: Factor Focus With Deutsche Smart Beta ETF Lastly, the low vol/dividend strategy can act as an alternative to fixed-income assets as the three-decade long bull rally in bonds comes to an end. Money managers may find it harder to hit the required 60/40 stock/bond returns of yesteryear, but a low volatility and high dividend strategy may help fill in the gap. LVHD holds almost 90 stocks, almost 42% of which have market values north of $50 billion. Utilities and consumer staples names combine for 41% of the ETF's weight. The industrial and financial services sectors combine for 23% of LVHD's lineup. For more on smart beta ETFs, please visit our Smart Beta Channel. Read more on ETFtrends.com