SPHB Vs. SPLV—Which Beta Is Smarter?

Paul Britt
March 15, 2013

High beta works great when markets are up, right? Well, not quite.


Almost exactly a year ago, I blogged that markets could be poised for recovery and that a high-beta play would likely leave a low-volatility vehicle in the dust.

I got it half right. I’m happy to report that one year later almost to the day, the S&P is testing new highs.

But the vehicle I recommended to play this gain was a bit of a clunker; namely, the PowerShares S&P 500 High Beta ETF (NYSEArca: SPHB).

I opined that a high-beta SPHB would beat the wildly popular PowerShares S&P 500 Low Volatility (NYSEArca: SPLV) if the market went up.

The tale of the tape proves me wrong. Emphatically.

Here’s a chart of total net asset value for the past 12 months (March 14, 2012 through March 13, 2013, Bloomberg data).

I’ve also got the SPDR S&P 500 (NYSEArca: SPY) in there to represent the market.


1-Yr no SSO


The market is up 13.9 percent in the last 12 months. But SPHB is up only 11.1 percent, with huge volatility to boot. Meanwhile, SPLV, the mild-mannered low-vol fund, turned in a nice steady rise of 17.6 percent in the period.

I realize that the market as represented by SPY didn’t trend positive over the whole period. It bottomed at -7.9 percent in early June 2012. But SPHB plumbed far greater depths: -20.8 percent. And SPLV’s low point? Just -1.3 percent.

Sector biases help explain these differences. SPHB’s bias toward energy and financials helped to pull it down in June 2012, while SPLV’s preference for utilities and consumer staples contributed to steady, positive returns.

What’s more interesting to me is the shiny rearview mirror. I had the market call right a year ago but chose the wrong ride.

So, how would a simple double-exposure 2x leveraged fund have done?


Massive inflows into U.S. equity funds on Monday, Dec. 22, propelled total ETF assets to a new record.

'SPY' raked in more than $12 billion Monday, Dec. 22, pacing State Street's issuer-leading inflows on the day, as total U.S.-listed ETF assets jumped to $2.005 trillion.


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