Low volatility investing
Proven downside protection with a stable source of income
Conservative equities is our active approach to low volatility investing. It is based on the anomaly that low-risk stocks tend to deliver a higher risk-adjusted return than high-risk stocks, contrary to classical finance theories. An approach that leads to a portfolio that offers stable equity returns and tend to generate high dividends.
Guide to low volatility
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Proven track record
Global strategy since
2006 -
As of January 2020*
Risk-adjusted outperformance
3.78% -
As of January 2020
Assets
AUD 36 bn
* The risk-adjusted outperformance is defined as Jensen’s alpha against the MSCI World Index (net return), based on monthly investment returns in EUR, gross of fees, for Robeco QI Institutional Global Developed Conservative Equities as a representative of the strategy. In reality, management fees and transaction and other costs are charged. These have a negative effect on the returns shown. The value of your investments may fluctuate. Results obtained in the past are no guarantee for the future.
Our low volatility strategies
The risk-return paradox of low volatility investing
In recent years, low volatility has become a new investment style offering lower risk, without reducing return. It is this risk-return paradox that still shakes the fundaments of financial theory. In doing so, investors profit from the paradox. That’s good, but we believe there’s a better way.
Stable equity returns tend to come with high income
We think it is unwise to select stocks purely based on risk considerations, ignoring the price you pay for them. This is why we also consider valuation and momentum factors to enhance returns. This approach leads to a portfolio that offers stable equity returns and tends to generate high dividends.
- Dividends are a significant and stable source of equity returns
- Dividend yield is one of the most defensive measures of value
- High dividends help enhance long-term returns and limit drawdowns
The average return series are based on the gross asset values of Robeco QI Institutional Global Developed Conservative Equities since inception (October 2006) until December 2019, gross of fees, based in EUR.
In reality, management fees and other costs are charged. These have a negative effect on the returns shown. The fund and its reference indices have been hedged for currency risk since 30 June 2012. The value of your investments may fluctuate. Results obtained in the past are guarantee for the future.
Winning by losing less in down markets
Better capital preservation can be achieved due to a significant reduction of losses during down markets. In a very bullish environment, the strategy could lag the overall market, while still delivering solid absolute returns. Once the market recovers, low volatility stocks have to make up less lost ground.
How to apply the Conservative strategy in a portfolio
Risk reduction
A pension fund with a low funding level after the financial crisis replaced conventional equities with Conservative equities to reduce risk while not giving up equity returns.
Income generator
A bank decided to include Conservative equities in its defensive income model portfolio, as the strategy combines high dividend yield with lower downside risk.
Diversification
A family office added the Conservative equity strategy to its portfolio of higher risk equity funds, in order to stabilize the overall performance.
Sustainability integration
An environmentally aware pension fund wanted to limit the ecological footprint, increase the ESG profile and reduce risk and therefore invested in the Conservative sustainable equity strategy.
Proven track record
For over ten years, we have been offering a distinctive approach to low-volatility investing, based on award-winning research.
- First multi-factor models developed in 1994
- First Conservative equity strategy launched in 2006
- A wide range of strategies: global developed, European, emerging, all countries, US and sustainable
Guide to Conservative Investing
Defensive low-risk strategies are designed to exploit the low-risk premium and play an increasingly important role in equity portfolios: by lowering the overall portfolio risk, by further diversifying the equity portfolio, or by offering a defensive approach to dividend investing.
02-02-2023
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Insight
