Balancing Risk with a Diversifying Low Volatility Exposure
Despite the dominance of growth stocks in the past decade, low volatility exposure has provided strong relative risk-adjusted performance, especially during down market months.
Investors who expect the reflation trade to continue on positive earnings and inflation expectations can look to complement a portfolio with downside protection.
In addition to strong low volatility exposure, the index tracked by our low volatility ETF aims to offer diversification* from large cap (size) and a strong yield following the August 2021 rebalance.
Growth-dominant sectors (e.g. technology, communication services and consumer discretionary) and the FAANG stocks in particular have led the S&P 500 Index to its current all-time highs. Despite these relatively high volatility companies leading the market on a nominal basis, low volatility stocks have still provided strong relative risk-adjusted performance since the launch of the S&P Low Volatility Index in April 2011, as evidenced by the strong Sharpe ratio of 1.06 (see Figure 1).
Figure 1: Risk Return Comparison
We see this result because the relationship between excess performance of the S&P Low Volatility Index and the nominal performance of the S&P 500 is negative (see Figure 2). This means that low volatility stocks tend to outperform, on average, in markets where the S&P 500 trades lower. The relationship creates an opportunity for investors to build a degree of protection into portfolios through diversification.
Figure 2: Monthly US Low Volatility Active Return vs. Market Return
The asymmetric relationship of relative returns is not the only diversification opportunity for investors in low volatility. Following the August 2021 rebalance, the S&P Low Volatility Index offers significantly low size exposure (i.e. stocks with smaller market capitalisation) and significantly high dividend yield exposure (see Figure 3).
Figure 3: FaCS Active Exposure Comparison (vs. S&P® 500 Index)
How to play this theme
Within US equities, we believe investors focused on medium to longer-term volatility may benefit from the diversification of a strategic investment to low volatility. SPDR® offers a suite of low volatility strategies that follow a simple yet effective methodology. In one trade, investors can introduce a defensive posture to their equity allocations using the SPDR® S&P® 500 Low Volatility UCITS ETF or a similar exposure in eurozone or global equities. To learn more about this ETF, and to view performance history, please follow visit the fund page.
*Diversification does not ensure a profit or guarantee against loss.
Information Classification: General Access.
For professional clients use only.
For Investors in Austria: The offering of SPDR ETFs by the Company has been notified to the Financial Markets Authority (FMA) in accordance with section 139 of the Austrian Investment Funds Act. Prospective investors may obtain the current sales Prospectus, the articles of incorporation, the KIID as well as the latest annual and semi-annual report free of charge from State Street Global Advisors Europe Limited, Branch in Germany, Brienner Strasse 59, D-80333 Munich. T: +49 (0)89-55878-400.F: +49 (0)89-55878-440.
For Investors in Finland: The offering of funds by the Companies has been notified to the Financial Supervision Authority in accordance with Section 127 of the Act on Common Funds (29.1.1999/48) and by virtue of confirmation from the Financial Supervision Authority the Companies may publicly distribute their Shares in Finland. Certain information and documents that the Companies must publish in Ireland pursuant to applicable Irish law are translated into Finnish and are available for Finnish investors by contacting State Street Custodial Services (Ireland) Limited, 78 Sir John Rogerson’s Quay, Dublin 2, Ireland.
For Investors in France: This document does not constitute an offer or request to purchase shares in the Company. Any subscription for shares shall be made in accordance with the terms and conditions specified in the complete Prospectus, the KIID, the addenda as well as the Company Supplements. These documents are available from the Company centralizing correspondent: State Street Banque S.A., Coeur Défense - Tour A - La Défense 4 33e étage 100, Esplanade du Général de Gaulle 92 932 Paris La Défense cedex France or on the French part of the site ssga.com/etfs. The Company is an undertaking for collective investment in transferable securities (UCITS) governed by Irish law and accredited by the Central Bank of Ireland as a UCITS in accordance with European Regulations. European Directive no. 2014/91/EU dated 23 July 2014 on UCITS, as amended, established common rules pursuant to the cross-border marketing of UCITS with which they duly comply. This common base does not exclude differentiated implementation. This is why a European UCITS can be sold in France even though its activity does not comply with rules identical to those governing the approval of this type of product in France.The offering of these compartments has been notified to the Autorité des Marchés Financiers (AMF) in accordance with article L214-2-2 of the French Monetary and Financial Code.
For Investors in Germany: The offering of SPDR ETFs by the Companies has been notified to the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) in accordance with section 312 of the German Investment Act. Prospective investors may obtain the current sales Prospectuses, the articles of incorporation, the KIIDs as well as the latest annual and semi-annual report free of charge from State Street Global Advisors Europe Limited, Branch in Germany, Brienner Strasse 59, D-80333 Munich. Telephone: +49 (0)89-55878-400. Facsimile: +49 (0)89-55878-440.
Ireland: State Street Global Advisors Europe Limited is regulated by the Central Bank of Ireland. Registered office address 78 Sir John Rogerson’s Quay, Dublin 2. Registered Number: 49934. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300.
Israel: No action has been taken or will be taken in Israel that would permit a public offering of the Securities or distribution of this sales brochure to the public in Israel. This sales brochure has not been approved by the Israel Securities Authority (the ‘ISA’).
Accordingly, the Securities shall only be sold in Israel to an investor of the type listed in the First Schedule to the Israeli Securities Law, 1978, which has confirmed in writing that it falls within one of the categories listed therein (accompanied by external confirmation where this is required under ISA guidelines), that it is aware of the implications of being considered such an investor and consents thereto, and further that the Securities are being purchased for its own account and not for the purpose of re-sale or distribution.
This sales brochure may not be reproduced or used for any other purpose, nor be furnished to any other person other than those to whom copies have been sent.
Nothing in this sales brochure should be considered investment advice or investment marketing as defined in the Regulation of Investment Advice, Investment Marketing and Portfolio Management Law, 1995 (“the Investment Advice Law”). Investors are encouraged to seek competent investment advice from a locally licensed investment advisor prior to making any investment. State Street is not licensed under the Investment Advice Law, nor does it carry the insurance as required of a licensee thereunder.
This sales brochure does not constitute an offer to sell or solicitation of an offer to buy any securities other than the Securities offered hereby, nor does it constitute an offer to sell to or solicitation of an offer to buy from any person or persons in any state or other jurisdiction in which such offer or solicitation would be unlawful, or in which the person making such offer or solicitation is not qualified to do so, or to a person or persons to whom it is unlawful to make such offer or solicitation.
Italy: State Street Global Advisors Europe Limited, Italy Branch (“State Street Global Advisors Italy”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors Italy is registered in Italy with company number 11871450968 - REA: 2628603 and VAT number 11871450968, and its office is located at Via Ferrante Aporti, 10 - 20125 Milan, Italy. T: +39 02 32066 100. F: +39 02 32066 155.
For Investors in Luxemburg: The Companies have been notified to the Commission de Surveillance du Secteur Financier in Luxembourg in order to market its shares for sale to the public in Luxembourg and the Companies are notified Undertakings in Collective Investment for Transferable Securities (UCITS).
Netherlands: This communication is directed at qualified investors within the meaning of Section 2:72 of the Dutch Financial Markets Supervision Act (Wet op het financieel toezicht) as amended. The products and services to which this communication relates are only available to such persons and persons of any other description should not rely on this communication. Distribution of this document does not trigger a licence requirement for the Companies or SSGA in the Netherlands and consequently no prudential and conduct of business supervision will be exercised over the Companies or SSGA by the Dutch Central Bank (De Nederlandsche Bank N.V.) and the Dutch Authority for the Financial Markets (Stichting Autoriteit Financiële Markten). The Companies have completed their notification to the Authority Financial Markets in the Netherlands in order to market their shares for sale to the public in the Netherlands and the Companies are, accordingly, investment institutions (beleggingsinstellingen) according to Section 2:72 Dutch Financial Markets Supervision Act of Investment Institutions.
Norway: The offering of SPDR ETFs by the Companies has been notified to the Financial Supervisory Authority of Norway (Finanstilsynet) in accordance with applicable Norwegian Securities Funds legislation. By virtue of a confirmation letter from the Financial Supervisory Authority dated 28 March 2013 (16 October 2013 for umbrella II) the Companies may market and sell their shares in Norway.
For Investors in Spain: State Street Global Advisors SPDR ETFs Europe I and II plc have been authorised for public distribution in Spain and are registered with the Spanish Securities Market Commission (Comisión Nacional del Mercado de Valores) under no.1244 and no.1242. Before investing, investors may obtain a copy of the Prospectus and Key Investor Information Documents, the Marketing Memoranda, the fund rules or instruments of incorporation as well as the annual and semi-annual reports of State Street Global Advisors SPDR ETFs Europe I and II plc from Cecabank, S.A. Alcalá 27, 28014 Madrid (Spain) who is the Spanish Representative, Paying Agent and distributor in Spain or at spdrs.com. The authorised Spanish distributor of State Street Global Advisors SPDR ETFs is available on the website of the Securities Market Commission (Comisión Nacional del Mercado de Valores).
Switzerland: The collective investment schemes referred to herein are collective investment schemes under Irish law. Prospective investors may obtain the current sales prospectus, the articles of incorporation, the KIID as well as the latest annual and semi-annual reports free of charge from the Swiss Representative and Paying Agent, State Street Bank International GmbH, Munich, Zurich Branch, Beethovenstrasse 19, 8027 Zurich as well as from the main distributor in Switzerland, State Street Global Advisors AG, Beethovenstrasse 19, 8027 Zurich. Before investing please read the prospectus and the KIID, copies of which can be obtained from the Swiss representative, or at ssga.com.
United Kingdom: The Funds have been registered for distribution in the UK pursuant to the UK’s temporary permissions regime under regulation 62 of the Collective Investment Schemes (Amendment etc.) (EU Exit) Regulations 2019. The Funds are directed at 'professional clients' in the UK (as defined in rules made under the Financial Services and Markets Act 2000) who are deemed both knowledgeable and experienced in matters relating to investments. The products and services to which this communication relates are only available to such persons and persons of any other description should not rely on this communication. Many of the protections provided by the UK regulatory system do not apply to the operation of the Funds, and compensation will not be available under the UK Financial Services Compensation Scheme.
This document has been issued by State Street Global Advisors Europe Limited (“SSGAEL”), regulated by the Central Bank of Ireland. Registered office address 78 Sir John Rogerson’s Quay, Dublin 2. Registered number 145221. T: +353 (0)1 776 3000. Fax: +353 (0)1 776 3300. Web: ssga.com.
SPDR ETFs is the exchange traded funds (“ETF”) platform of State Street Global Advisors and is comprised of funds that have been authorised by Central Bank of Ireland as open-ended UCITS investment companies.
State Street Global Advisors SPDR ETFs Europe I & II plc issue SPDR ETFs, and is an open-ended investment company with variable capital having segregated liability between its sub-funds. The Company is organised as an Undertaking for Collective Investments in Transferable Securities (UCITS) under the laws of Ireland and authorised as a UCITS by the Central Bank of Ireland.
All the index performance results referred to are provided exclusively for comparison purposes only. It should not be assumed that they represent the performance of any particular investment.
The information provided does not constitute investment advice as such term is defined under the Markets in Financial Instruments Directive (2014/65/EU) or applicable Swiss regulation and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell any investment. It does not take into account any investor's or potential investor’s particular investment objectives, strategies, tax status, risk appetite or investment horizon. If you require investment advice you should consult your tax and financial or other professional advisor.All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
ETFs trade like stocks, are subject to investment risk and will fluctuate in market value. The investment return and principal value of an investment will fluctuate in value, so that when shares are sold or redeemed, they may be worth more or less than when they were purchased. Although shares may be bought or sold on an exchange through any brokerage account, shares are not individually redeemable from the fund. Investors may acquire shares and tender them for redemption through the fund in large aggregations known as “creation units.” Please see the fund’s prospectus for more details.
The trademarks and service marks referenced herein are the property of their respective owners. Third party data providers make no warranties or representations of any kind relating to the accuracy, completeness or timeliness of the data and have no liability for damages of any kind relating to the use of such data.
The views expressed in this material are the views of SPDR EMEA Strategy & Research through the period ending 2 August 2021 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Past performance is not a guarantee of future results.
Investing involves risk including the risk of loss of principal.
This information should not be considered a recommendation to invest in a particular sector or to buy or sell any security shown. It is not known whether the sectors or securities shown will be profitable in the future.
Equity securities may fluctuate in value in response to the activities of individual companies and general market and economic conditions.
Low volatility funds can exhibit relative low volatility and excess returns compared to the Index over the long term; both portfolio investments and returns may differ from those of the Index. The fund may not experience lower volatility or provide returns in excess of the Index and may provide lower returns in periods of a rapidly rising market. Active stock selection may lead to added risk in exchange for the potential outperformance relative to the Index.
Standard & Poor’s, S&P and SPDR are registered trademarks of Standard & Poor’s Financial Services LLC (S&P); Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones); and these trademarks have been licensed for use by S&P Dow Jones Indices LLC (SPDJI) and sublicensed for certain purposes by State Street Corporation. State Street Corporation’s financial products are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates and third party licensors and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability in relation thereto, including for any errors, omissions, or interruptions of any index.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.
The information contained in this communication is not a research recommendation or ‘investment research’ and is classified as a ‘Marketing Communication’ in accordance with the Markets in Financial Instruments Directive (2014/65/EU) or applicable Swiss Regulation. This means that this marketing communication (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research (b) is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Investing in foreign domiciled securities may involve risk of capital loss from unfavourable fluctuation in currency values, withholding taxes, from differences in generally accepted accounting principles or from economic or political instability in other nations. Investments in emerging or developing markets may be more volatile and less liquid than investing in developed markets and may involve exposure to economic structures that are generally less diverse and mature and to political systems which have less stability than those of more developed countries.
You should obtain and read the SPDR prospectus and relevant Key Investor Information Document (KIID) prior to investing, which may be obtained from spdrs.com. These include further details relating to the SPDR funds, including information relating to costs, risks and where the funds are authorised for sale.
SPDR ETFs è la piattaforma di exchange traded fund ("ETF") di State Street Global Advisors ed include fondi autorizzati dalle Autorità Europee come fondi aperti d'investimento UCITS. Gli SPDR ETFs potrebbero non essere disponibili o adatti a lei.
Gli ETF sono negoziati come le azioni, sono soggette al rischio d'investimento, il loro valore di mercato fluttua e potrebbero essere negoziati a prezzi superiori od inferiori al loro valore patrimoniale netto. Le commissioni di intermediazione ed i costi dell'ETF ridurranno i rendimenti.
Variazioni sui tassi di cambio possono avere un effetto negativo sul valore, prezzo o rendita dell'investimento. Inoltre non ci sono garanzie che un ETF raggiungerà i suoi obiettivi d'investimento
LE QUOTE DEI FONDI DELLA SICAV SPDR® ETF, SSGA SPDR ETFS EUROPE I PLC E SSGA SPDR ETFS EUROPE II PLC POTREBBERO NON ESSERE DISPONIBILI O NON ADATTE A VOI.. LE OPINIONI ESPRESSE IN QUESTO SITO NON COSTITUISCONO UN CONSIGLIO DI INVESTIMENTO. IN CASO DI DUBBIO, SI RACCOMANDA DI RIVOLGERSI AD UN CONSULENTE INDIPENDENTE. LE INFORMAZIONI E LE OPINIONI CONTENUTE NEL PRESENTE SITO NON COSTITUISCONO UNA SOLLECITAZIONE O UN'OFFERTA ALL'ACQUISTO O ALLA VENDITA DELLE QUOTE DEI FONDI O DI QUALSIVOGLIA ALTRO STRUMENTO FINANZIARIO.
Standard & Poor's®, S&P® e SPDR® sono marchi registrati di Standard & Poor's Financial Services LLC (S&P); Dow Jones è un marchio registrato di Dow Jones Trademark Holdings LLC (Dow Jones); questi marchi registrati sono stati concessi in licenza d'uso a S&P Dow Jones Indices LLC (SPDJI) e in sottolicenza per fini specifici a State Street Corporation. I prodotti finanziari di State Street Corporation non sono sponsorizzati, sostenuti, venduti o promossi da SPDJI, Dow Jones, S&P, dalle loro rispettive affiliate e licenzianti terzi e nessuna delle parti citate rilascia dichiarazioni in merito all'opportunità di investire in tale/i prodotto/i, né è responsabile in relazione agli stessi, fra l'altro, per errori, omissioni o interruzioni di qualsiasi indice.
Gli SPDR ETFs possono essere offerti e venduti esclusivamente nelle giurisdizioni in cui sono stati preventivamente autorizzati, in accordo con le normative vigenti.
Informazioni relative al Messico
Le presenti informazioni non costituiscono e non sono da intendersi come la commercializzazione o l’offerta di titoli e, di conseguenza, non dovrebbero essere interpretate come tali. I Fondi indicati nella presente non sono stati e non saranno registrati ai sensi della legge messicana sul mercato dei valori mobiliari (Ley del Mercado de Valores) e non potranno essere oggetto di offerta pubblica o essere venduti negli Stati Messicani Uniti. La documentazione divulgativa relativa a uno qualsiasi dei suddetti Fondi non può essere distribuita pubblicamente in Messico e le azioni dei Fondi non possono essere scambiate in questo paese.
Si consiglia di procurarsi e leggere i Prospetti e i KIID relativi agli SPDR ETFs prima dell'investimento. Ulteriori informazioni e i prospetti aggiornati/KIID che descrivono le caratteristiche, i costi e i rischi degli SPDR ETFs sono disponibili per i residenti dei Paesi in cui gli SPDR ETFs sono autorizzati alla vendita sul sito spdrs.com o presso l'ufficio di SSGA locale.