There’s A New ETF Inflow Asset Leader

May 02, 2016

[Editor's note: A previous version of this article erroneously said USMV had surpassed GLD on the year-to-date inflows list. This version correctly puts USMV in the No. 2 position.]

The SPDR Gold Trust (GLD | A-100) remains the flows leader for 2016 thanks to huge investor interest in the yellow metal. But another ETF is quietly nipping at the heels of the venerable gold fund thanks to big inflows of its own.

In the year-to-date period through April 29, the iShares MSCI USA Minimum Volatility ETF (USMV | A-71) has taken in $4.7 billion in investor capital, second only to $6.2 billion for GLD, according to FactSet data.

USMV now boasts an impressive $12.4 billion in assets under management, and of course, GLD is no slouch either, with $33.5 billion in assets.

Low-Volatility Portfolio

The fact that there's been tremendous volatility and two big stock market corrections in the past eight months may be why USMV has seen such a surge of interest from investors.

As the name suggests, the fund aims to minimize the volatility of its portfolio. It does this by holding a basket of stocks that together have low-volatility characteristics. Unlike the competing PowerShares S&P 500 Low Volatility ETF (SPLV | A-58)―which simply holds the 100 least volatile stocks in the S&P 500― USMV considers the correlations between various stocks to come up with its optimized mix.

Sector Tilts

The low-volatility strategy has given these funds striking sector tilts relative to the broader market. For example, financials are the largest sector weighting for USMV, while technology is the largest for the SPDR S&P 500 (SPY | A-98).

Additionally, consumer staples and utilities―two sectors well known as safe and as having low volatility―hold a much greater weighting in USMV compared with SPY. Staples represent 14.6% of USMV and 10.2% of SPY, while utilities represent 8.5% of USMV and 3.3% of SPY.

It's also worth noting that energy—which was a big weight on the performance of the broader market last year—only accounts for 2.1% of USMV's portfolio, versus 7.3% for SPY.

Outperformance This Year

Performancewise, USMV has thrived this year amid the wild up and down swings in the broader stock market. The ETF is up 4.6% year-to-date, compared with a gain of 1.1% for SPY. SPLV has outperformed as well, with a return of 3.9%.


Importantly, the low-volatility ETFs went down much less than other ETFs during the market swoon earlier this year. USMV and SPLV saw a maximum drawdown of about 6%, compared with more than 10% for SPY.

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