Minimum volatility:
Evaluating valuations

Higher valuations have not historically hindered the ability of
minimum volatility funds to achieve their primary aim of reducing risk over the long term.


Key takeaways

  • Higher valuations have not historically hindered the ability of minimum volatility funds to achieve their primary aim of reducing risk over the long term.
  • Minimum volatility funds are not market timing vehicles for capturing short term periods of outperformance and avoiding inevitable periods of underperformance.
  • iShares suite of minimum volatility funds may be less susceptible to rising interest rates than other strategies in Canada with similar objectives.

VOLATILITY REDUCTION REGARDLESS OF VALUATIONS

Image:VOLATILITY REDUCTION REGARDLESS OF VALUATIONS

The chart measures the trailing P/E premium or discount of MSCI USA Minimum Volatility Index to the market, as represented by the MSCI USA Index. The chart also reflects the percentage difference between the 3–year, rolling annualized standard deviation of US dollar returns for the MSCI USA Minimum Volatility index versus the MSCI USA index. The “date” signifies the return period start date. Data presented beginning inception of the index (6/2008) and thus “investability”. Index returns are for illustrative purposes only. Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results. Source: BlackRock, MSCI.

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