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Winning: High Beta ETFs


Investors still like low volatility exchange traded funds. Combine inflows of about $1.52 billion this year to the iShares MSCI USA Minimum Volatility ETF (USMV) and the PowerShares S&P 500 Low Volatility Portfolio (SPLV)   say as much.

It is also hard to quibble with the returns. SPLV and USMV are up an average of almost 22% this year and while that lags the S&P 500, those performances still are not too shabby when considering SPLV and USMV are chock full of low beta stocks. [Loving Low Volatility]

As U.S. stocks have kept rising, however, high beta names have soared as low beta fare have been laggards and although the trend seemed to take a rest last month, it has recently resumed, reports Brendan Conway for Barron’s.

Although some low beta sectors have thrived this year, continually rising U.S. stocks have provided a risk on environment that buoyed the fortunes of SPLV’s high beta cousin, the PowerShares S&P 500 High Beta Portolio (SPHB).

Not only has SPHB surged 34.3% this year, it has taken in almost $336.4 million, or 61%, of its $549.3 million in assets under management, since the start of 2013. SPHB invests in the 100 S&P 500 with highest betas on a 12-month trailing basis.  Just over 41% of the ETF’s combined weight is allocated to financial services and consumer discretionary names. [High Beta and Low Volatility ETFs]

When it comes ex-U.S. developed market stocks, the PowerShares S&P International Developed High Beta Portfolio (IDHB) and the PowerShares S&P International Developed Low Volatility Portfolio (IDLV) , which are spins on the MSCI EAFE Index, have been almost even with each other with a slight nod to IDHB. IDLV has $144.2 million in assets.

Those two ETFs are up an average of 12% this year while the iShares MSCI EAFE Minimum Volatility ETF (EFAV) is higher by 11.4%.

Emerging markets stand as one market segment where low volatility has trumped high beta. The PowerShares S&P Emerging Markets High Beta Portfolio (EEHB) is off 11.8% year-to-date, but the PowerShares S&P Emerging Markets Low Volatility Portfolio (EELV) and the iShares MSCI Emerging Markets Minimum Volatility ETF (EEMV) are down just 2% apiece.  [Two ETFs for Emerging Markets Seasonality]

PowerShares S&P 500 High Beta Portfolio

ETF Trends editorial team contributed to this post.

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.