In addition to selling stocks and picking up assets considered safer, such as government bonds, investors are piling into funds meant to protect against stock swings.
iShares Edge MSCI Min Vol USA Exchange-Traded Fund,
known by the ticker USMV, lured about $905 million during last week’s volatility, recording the most weekly inflows since May and making it the fifth-most-popular ETF last week in terms of fund flows, according to FactSet. It ranked just behind funds tracking gold and Japanese government bonds.
The iShares fund tries to pick companies that are considered less vulnerable to market turbulence such as
and typically has large exposure to dividend-paying sectors, according to FactSet. It has been the tenth-most-popular ETF this year in terms of fund flows.
Invesco S&P 500 Low Volatility ETF,
known by the ticker SPLV, drew $44 million over that week. The fund tracks shares of companies including
The ETF picks “about 100 S&P 500 stocks with the lowest daily volatility over the past year,” according to FactSet.
U.S. stocks just finished a wild week: Trade talks between the U.S. and China, a potential currency battle and economic growth around the world led to large intraday swings for major U.S. stock indexes. One measure of stock volatility—the Cboe Volatility Index, or VIX—jumped last week to the highest level since early January.
As U.S. stocks finished one of the most volatile weeks of the year, ending slightly lower, the two ETFs each notched gains of roughly 1%. They have jumped about 20% this year, outpacing the S&P 500’s 15.6% advance as of midday Monday.
This performance is surprising to some observers. Todd Rosenbluth, head of fund research at research firm CFRA, said investors typically turn to these strategies for protection, expecting their losses will be milder during stock selloffs but also that gains won’t be as dramatic.
“Investors have not come to look for above-average performance but yet they’ve ended up with it,” said Mr. Rosenbluth. But, he cautioned: “If an investor’s flocking to them seeking to outperform in an up market, they’re going to be disappointed.”
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