A study* by three Blue Sky pension provider researchers (Bastiaan Pluijmers, Imke Hollander and Ramon Tol) together with Dimitris Melas from MSCI compares the characteristics of nine different low-volatility strategies. Apart from an obvious large tilt towards low-beta and low-volatility stocks, the authors find a tilt towards smaller companies.
Most managed volatility strategies are not biased towards value stocks. In our opinion the explanation for this is that value stocks tend to become high-risk during recessions. The study also finds strong commonalities in sector positioning, with consistent overweights in Staples, Health, Telcos and Utilities, and consistent underweights in Financials, Industrials and Tech.
All managers have positive alpha, also corrected for different style biases, but the statistical significance is not strong mainly due to the short sample period 2006-2010. Because of the large common deviations from the cap-weighted index, the authors conclude that it is important to compare low volatility strategies only with each other, and that the decision to allocate to such strategies should be made at a strategic level.
Robeco Institutional Asset Management B.V. (DIFC Branch) is regulated by the Dubai Financial Services Authority (“DFSA”) and only deals with Professional Clients and Market Counterparties, and does not deal with Retail Clients as defined by the DFSA.
Neither information nor any opinion expressed on the website constitutes a solicitation, an offer or a recommendation to buy, sell or dispose of any investment, to engage in any other transaction or to provide any investment advice or service. An investment in a Robeco product should only be made after reading the related legal documents such as management regulations, prospectuses, annual and semi-annual reports, which can be all be obtained free of charge at this website and at the Robeco offices in each country where Robeco has a presence.