Low volatility exchange traded funds (ETFs) are designed to protect you from bumps in markets like those experienced over the past month and they seem to have proved their mettle during last month's market falls.
Every low volatility ETF listed on the London Stock Exchange has beaten its plain vanilla counterpart over the course of the three-month market rout triggered by the Chinese stock falls, one of the biggest tests for these funds to date. All five ETFs analysed delivered less volatile returns than their conventional counterparts on a weekly basis since the start of the crash at the beginning of July and 1 September 2015.
Ossiam FTSE 100 Minimum Variance UCITS ETF (UKMV) and SPDR S&P 500 Low Volatility ETF (USLV) were among the best at protecting investors. On a weekly basis between 1 July and 1 September, the Ossiam ETF has a volatility measure of 1.92 per cent, lower than the FTSE 100 at 2.62 per cent, and SPDR's original S&P 500 UCITS ETF (SPY5) scores 2.68 per cent which makes it more volatile than its low volatility offering at 1.37 per cent.