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How Low Volatility Strategies Can Add Long-Term Value

Portfolio Manager

Investors typically allocate to low volatility strategies to reduce total volatility and receive downside protection in portfolios, with the added benefit of earning competitive returns over the long term. Our data shows that it is important for investors to look beyond short-term quarterly reporting periods to evaluate whether low volatility strategies perform as intended, as strong equity market backdrops have historically caused intermittent weakness in low volatility strategies — but only for short-term periods. In this paper, we review the performance of these indexes over the last 20 years.

Historical data reveals that low volatility strategies have delivered several benefits to portfolios over the last 20 years:

  • Lower realized volatility1
  • Downside protection during adverse market conditions
  • Competitive returns over the long term