Low Volatility ETFs

This is one of a series of articles discussing smart beta ETFs. Other smart beta articles you can read:

A low volatility ETF screens its potential holdings based on the volatility of the market price or the volatility of the returns of the stock. Low volatility ETFs select more securities that have lower volatility than average. Although low volatility ETFs can outperform the market, low volatility ETFs are not necessarily designed to outperform the market. Rather, they attempt to appeal to investors who prefer less volatility. Certain investors are willing to give up a little return for a more consistent, stable return.

There are a large number of low volatility ETPs, as shown in this table:

Global Equity35
Special Security Types3
US Equity 73
US Fixed Income1

The number of low volatility ETFs continues to grow, as shown by this table:

Year of InceptionCount

Note that there were actually even more ETFs launched then this table shows, as we are only displaying the launch dates of ETFs still active in our database. There were more ETFs that were launched during these years that have since been closed down by their sponsor.

More and more ETFs are being launched that combine low volatility investing with other investment factors:

Number of Factors UsedCount

Here are the low volatility ETFs that only use volatility as a factor in selecting securities (i.e. they are not multi-factor ETFs), if you want to read some examples of the approaches taken by low volatility ETFs:

SymbolDescriptionInception DateCategoryActions
SPLVS&P 500 Low Volatility Portfolio ETF05/05/2011US Equity Analyze
ACWViShares Edge MSCI Minimum Volatility Global ETF10/18/2011Global EquityAnalyze
EEMViShares MSCI Emerging Markets Minimum Volatility ETF10/18/2011Global EquityAnalyze
EFAViShares MSCI EAFE Minimum Volatility Index Fund ETF10/18/2011Global EquityAnalyze
USMViShares MSCI U.S. Minimum Volatility ETF10/18/2011US Equity Analyze
EELVInvesco S&P Emerging Markets Low Volatility Portfolio ETF01/13/2012Global EquityAnalyze
IDLVS&P International Developed Low Volatility ETF01/13/2012Global EquityAnalyze
XMLVInvesco S&P 400 Low Volatility ETF02/12/2013US EquityAnalyze
XSLVInvesco S&P 600 Low Volatility ETF02/12/2013US Equity Analyze
LGLVSPDR SSGA US Large Cap Low Volatility Index ETF02/20/2013US Equity Analyze
SMLVSPDR SSGA US Small Cap Low Volatility Index ETF02/20/2013US Equity Analyze
SIZEiShares MSCI USA Size Factor ETF04/16/2013US Equity Analyze
IDLBInvesco FTSE International Low Beta Equal Weight Portfolio ETF11/05/2015Global EquityAnalyze
USLBInvesco Russell 1000 Low Beta Equal Weight Portfolio ETF11/05/2015US Equity Analyze
HDMVFirst Trust Horizon Managed Volatility Developed International ETF08/24/2016Global EquityAnalyze
HUSVFirst Trust Horizon Managed Volatility Domestic ETF08/24/2016US EquityAnalyze
SMMViShares Edge MSCI Min Vol USA Small-Cap ETF09/07/2016US Equity Analyze
FDLOFidelity Low Volatility Factor ETF09/12/2016US Equity Analyze
FLLVFranklin Liberty U.S. Low Volatility ETF09/20/2016US Equity Analyze
RNDMDeveloped International Equity Select ETF06/20/2017Global EquityAnalyze
RNEMEmerging Market Equity Select ETF06/20/2017Global EquityAnalyze
SPMVInvesco S&P 500 Minimum Variance Portfolio ETF07/13/2017US EquityAnalyze
DMRLDeltaShares S&P 500 Managed Risk ETF07/31/2017US Equity Analyze
DMRMDeltaShares S&P 400 Managed Risk ETF07/31/2017US EquityAnalyze
DMRSDeltaShares S&P 600 Managed Risk ETF07/31/2017US EquityAnalyze
RBINNationwide Risk-Based International Equity ETF09/15/2017Global EquityAnalyze
RBUSNationwide Risk-Based U.S. Equity ETF09/15/2017US Equity Analyze
JMINJPMorgan U.S. Minimum Volatility ETF11/09/2017US EquityAnalyze
VFMVVanguard U.S. Minimum Volatility ETF02/14/2018US EquityAnalyze
LSLTSalt Low truBeta US Market ETF03/13/2019US Equity Analyze
HSMVFirst Trust Horizon Managed Volatility Small/Mid ETF04/07/2020US EquityAnalyze
SIXL6 Meridian Low Beta Equity Strategy ETF05/11/2020US EquityAnalyze
GBLOGlobal Beta Low Beta ETF07/24/2020US Equity Analyze

Do low volatility ETFs outpeform?

There is some evidence that low volatility ETFs can outperform the market. S&P has two indexes that slice the S&P 500 into high beta stocks and low volatility stocks. SP500HBETA selects the 100 stocks in the S&P 500 Index with the highest beta. SP500LVOL selects the 100 stocks in the S&P 500 Index with the lowest volatility. This data suggests that those stocks with the highest beta underperform the market (SPY).

But if you look at the largest of the low volatility ETFs, the performance compared to SPY is not that great. Let's look at a couple of examples.

SPLV is one of the biggest of the low volatility ETFs. It invests in 100 of the stocks from the S&P 500 that have the lowest volatility during the past 12 months:

USMV is another one of the biggest low volatility ETFs. USMV uses a volatility model to select about 180 stocks from the MSCI USA Index, which is a capitalization-weighted index of the largest U.S. stocks (about 625 stocks).

Keep in mind that investors that use the Sharpe Ratio to build and analyze portfolios will tend to favor low volatility ETFs. The Sharpe Ratio rewards low volatility ETFs, because a low volatility ETF that generates the same return as its benchmark will have a higher Sharpe Ratio. Here are the lifetime Sharpe Ratios for USMV and SPLV (i.e. Sharpe Ratios calculated using the lifetime of the ETFs), compared to the Sharpe Ratio of SPY during the same matching periods:

SymbolDescriptionSharpe RatioSPY Sharpe Ratio
SPLVS&P 500 Low Volatility Portfolio ETF0.02320.9841
USMViShares MSCI U.S. Minimum Volatility ETF0.05751.1822

Since these ETFs have higher Sharpe Ratios, it means they have outperformed SPY on a risk adjusted basis.

Editor's Choice ETFs

The low volatility factor is much more commonly used by a multi-factor ETF rather than as a stand alone factor. One thing we do at StockMarketMBA.com is give each ETF a rating for long term investors. Here are the multi-factor ETFs that use low volatility as one investment factor that we have rated as an "editors choice", our highest rating:

SymbolDescriptionInception DateCategoryActions
SPLVS&P 500 Low Volatility Portfolio ETF05/05/2011US Equity Analyze
IDLVS&P International Developed Low Volatility ETF01/13/2012Global EquityAnalyze
XMLVInvesco S&P 400 Low Volatility ETF02/12/2013US EquityAnalyze
FLQEFranklin LibertyQ Emerging Markets ETF06/01/2016Global EquityAnalyze
XSHDInvesco S&P SmallCap High Dividend Low Volatility ETF11/29/2016US Equity Analyze

You can see a list of all ETFs that are using volatility as an investment factor using our ETF screener.

All data is a live query from our database. The wording was last updated: 04/09/2020.

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