Volatility

State Street launches low volatility ETFs with exposure to small and large cap equities

State Street Global Advisors (SSgA), the asset management arm of State Street Corporation, has launched the SPDR Russell 2000 Low Volatility ETF (SMLV) and the SPDR Russell 1000 Low Volatility ETF (LGLV).

Designed to provide investors with exposure to small and large cap equities while managing risk, both funds began trading on the NYSE Arca on 21 February 2013. 

“Our new low volatility SPDR ETFs were developed in response to increasing demand from investors looking to improve the risk adjusted returns of their portfolio, increase their equity allocation while maintaining downside protection, or tactically take a more defensive approach to the US large cap or small cap markets,” says James Ross, senior managing director and global head of SPDR exchange-traded funds at SSgA. “By helping investors and advisors better manage risk in their portfolios, the SPDR Russell 2000 Low Volatility ETF and SPDR Russell 1000 Low Volatility ETF are key additions to our growing family of SPDR ETFs.”

The SPDR Russell 2000 Low Volatility ETF seeks to track the performance of the Russell 2000 Low Volatility Index. The index is composed of low volatility stocks from the Russell 2000 Index based on volatility from the previous 252 trading days. The index is then optimised to provide low volatility small cap exposure while managing turnover and neutralising other factors, such as beta and momentum. The index is reconstituted monthly to maintain its focus on low volatility securities, and as of 31 January 2013, included approximately 164 securities. The SPDR Russell 2000 Low Volatility ETF’s expense ratio is 0.25 per cent.

The SPDR Russell 1000 Low Volatility ETF seeks to track the performance of the Russell 1000 Low Volatility Index. The index is composed of low volatility stock from the Russell 1000 Index based on volatility from the previous 252 trading days. The index is then optimised to provide low volatility large cap exposure while managing turnover and neutralising other factors, such as beta and momentum. The index is reconstituted monthly, and as of 31 January 2013, included approximately 95 securities. The SPDR Russell 1000 Low Volatility ETF’s expense ratio is 0.20 per cent.

“The Russell Low Volatility Indexes draw on Russell’s objective, rules-based, transparent index methodology to help investors construct a focused portfolio of stocks with lower volatility than their parent Russell 1000 and Russell 2000 Indexes,” says Rolf Agather, managing director of index research and innovation for Russell Investments. “In addition, when used as the basis for investable products such as ETFs, the Russell Low Volatility Indexes may help lower the overall volatility of investors’ equity portfolios.”
 

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