(April 23, 2012) — A range of indices tracking low-volatility and high beta strategies has been launched in Canada as the strategy gains more followers around the institutional vestment universe.
S&P Indices and TMX Group launched an index to track each strategy, claiming investor demand for benchmarking as they looked in to non-traditional asset classes.
Abigail Etches, Director at S&P Indices, said: “Canadian investors and portfolio managers, much like their global counterparts, are increasingly looking for unique, yet easy-to-understand methods for benchmarking specific market segments.
Etches said these benchmarks would be used by investors and their fund managers as a base for investment and trading strategies.
Although the ‘low volatility’ approach is not new, it has not converted too many large investors. However, with the onslaught of the financial crisis, investors were burned by volatility and have been looking for ways to reduce it in their overall portfolio.
This month, the Californian City of Fresno Retirement Systems received a presentation on the approach at their most recent board meeting, illustrating how investors have begun to take a more serious look at low-volatility investing.
At aiCIO’s Summit in New York this month, a panel of investors and providers discussed how volatility in a portfolio could be reduced while not sacrificing returns.
Panellists suggested diversification should still play a significant part in portfolio construction and hedging could not be forgotten even if volatility was theoretically dampened down across the holdings.
Asset managers and other market participants have been researching and preparing products in an effort to win clients over to the low volatility approach. Last month, European manager Robeco announced it had added a new forward looking tool that would predict the movement of stocks in a certain market environment rather than using historical data.