Low-Volatility Funds Got Volatile as U.S. Stock Market Sold Off
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High-dividend stocks bear brunt of worst selloff since Brexit
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Concerns about valuation in low-vol space surface again
Friday’s U.S. stock rout, the worst since Britain voted to leave the European Union, spared few investors, particularly not owners of exchange-traded funds designed to minimize turbulence.
Low-beta ETFs plunged even more than the broader market, extending a move that began two days earlier. The PowerShares S&P 500 Low Volatility portfolio slid almost 3 percent on Friday and the iShares Edge MSCI Min Vol USA ETF fell 2.7 percent, the worst daily losses in more than a year. Meanwhile, the S&P 500 dropped 2.5 percent.
While a few days say nothing about the ETFs’ viability as low-volatility surrogates, the declines illustrate what some say are distortions in a market that has been dominated by defensive shares. Not only have industries that make up the low-vol universe gotten expensive, many of them are extra sensitive to rising bond yields…
Low-Volatility Funds Got Volatile as U.S. Stock Market Sold Off
