Sibling Rivalry: SPLV & SPHB

March 14, 2012

Mounting signs of a recovering economy make me wonder if it’s time to view defensive plays as a way of getting left behind.

I understand why last year investors piled into the PowerShares S&P 500 Low Volatility Portfolio (NYSEArca: SPLV), a low-volatility play on the S&P 500 Index. After all, Shakespeare would recognize 2011’s equity returns: full of sound and fury signifying nothing.

SPLV now has $1.56 billion in assets, but perhaps its moment has passed.

Equity volatility, as measured by the CBOE Volatility Index, continued its downtrend this week, with another big drop on Monday.

More broadly, a steady if unspectacular stream of positive economic indicators—most recently this week’s retail sales data—points to recovery, if not outright expansion.

If all this is true, is SPLV’s overshadowed sibling, the PowerShares S&P 500 High Beta Portfolio (NYSEArca: SPHB), due for its time in the sun? It’s worth a look. Here are returns since the market’s most recent nadir on Oct. 4 of last year:


SPHB has screamed back at 36.6 percent while SPLV has delivered 15.2 percent. I’ve got the SPDR S&P 500 (NYSEArca: SPY) in there too, splitting the difference at 24.3 percent, as you might expect from a beta-one fund

Looking further back to May 5, the inception date of both funds, returns are again widely dispersed, but with SPHB’s on the losing end.

The two ETFs diverged most dramatically three months after launch, when the August 2011 downgrade of U.S. Treasurys roiled markets. PSHB in particular nose-dived while SPLV merely dipped.

SPHB is still struggling to catch up to SPLV after this downturn, with returns since inception of -9.1 percent, while SPLV has gained 10.3 percent.

SPHB vs SPY vs SPLV: Inception

SPHB’s history of returns is too short to support rigorous regression, but visually it does indeed look like the fund delivers what it promises: high beta.

It’s worth noting that SPHB juices up returns without resorting to leverage. While leverage has its place, funds with double- or triple-exposure, or even inverse funds, can have undesirable side effects over longer periods, as my colleague Devin Riley made clear in a recent blog.

My biggest concern on SPHB isn’t about beta or leverage, but instead about the nature of its basket.



Lean why bond ETFs are an essential part of a diversified portfolio with our bond ETF channel.

Learn how currency-hedged ETFs can reduce the currency risk in your portfolio.


'IBB' saw big inflows for a second-straight session on Wednesday, Sept. 30.

Inflows into 'XLV' on Wednesday, Sept. 30 paced gains for SSgA, which saw its assets grow by more than $1 billion.


By Dave Nadig

Five consequences of the proposed rules the SEC put out yesterday.

By Sumit Roy

It's never happened, but it could.

By Dave Nadig

Think twice before getting excited.

By Sumit Roy

Readers bring up some interesting questions in light of the recent plunge in a popular oil ETN.


By Denise Krisko

Managing liquid alt strategies.

By Scott Eldridge

Protecting your fixed income allocation in a volatile rate environment.

By iShares

How currency-hedged ETFs can help U.S. investors investing in international stocks.