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iShares targets minimum volatility with new ETF range

by Emma Dunkley on Dec 03, 2012 at 10:36

iShares targets minimum volatility with new ETF range

iShares, the exchange traded fund (ETF) arm of BlackRock, has launched a raft of ETFs designed to deliver returns with the lowest absolute volatility.

The new range, launched on the London Stock Exchange, comprises the iShares MSCI World Minimum Volatility, MSCI Emerging Markets Minimum Volatility, Europe Minimum Volatility and S&P 500 Minimum Volatility.

The physically-replicated funds, which use an optimisation process to enhance liquidity, track their respective benchmarks which are based on a minimum volatility strategy.

This selects securities from a parent index, based on estimates of the risk profile and expected volatility of each constituent, as well as the correlation between the constituents.

The aim of the strategy is to select the stocks with the lowest absolute volatility of returns, subject to certain risk diversification constraints, minimum and maximum weightings, sectors and country weights.

The ETFs, which have total expense ratios of 0.20% to 0.40%, have not yet gained reporting status in the UK, although they are in the process of seeking it.

The launch marks the ETF provider’s expansion into the ‘Smart Beta’ space in the UK, with a set of products providing enhanced equity exposure.

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