State Street Global Advisors—through SPDR ETFs, the firm’s exchange-traded funds platform— has launched the first ever ETF in Europe to track the S&P 500 Low Volatility Index.
The new ETF, the SPDR S&P 500 Low Volatility ETF (USLV), is listed on the London Stock Exchange, is physically-backed and carries a total expense ratio of 35 basis points.
The S&P 500 Low Volatility Index is rebalanced quarterly and is comprised of 100 stocks from the S&P 500 that have had the lowest historical price volatility in the prior 252 trading days.
State Street is not the first ETF manager to mine the low-volatility vein. In May 2011, Invesco PowerShares created the PowerShares S&P 500 Low Volatility Portfolio ETF (SPLV), listed on the New York Stock Exchange. The wildly popular ETF accumulated assets at a record pace, quickly reaching $2.5 billion since launching, according to Morningstar.
Indeed, the new SPDR fund also is not the first ETF in Europe to offer exposure to a lower volatility slice of the S&P 500. Paris-based Ossiam launched the Ossiam ETF US Minimum Variance (LUMV) in June 2011 and has accumulated assets of more than $260 million.
Like the new SPDR ETF, the Ossiam fund is listed on several European exchanges, including the LSE and the Deutsche Börse. Unlike the SPDR S&P 500 Low Volatility ETF, however, the Ossiam ETF US Minimum Variance tracks the Ossiam U.S. Minimum Variance Index NR, a specially created index of the 250 most liquid stocks from the S&P 500, weighted to lower the overall volatility of the portfolio.
The new SPDR ETF’s launch comes at a time when investors continue to look for defensive, low-volatility plays on U.S. stocks in an effort to limit portfolio downside risk even while staying invested in equities. “With the volatility in equity markets over the past couple of years, many clients are looking for ways to help reduce the potential drawdown impact of market retreats, while still participating in some of the upside of U.S. equity investing,” said Scott Ebner, global head of product development at SPDR ETFs.
With the creation of the new SPDR S&P 500 Low Volatility ETF, the total number of SPDR ETFs listed on European exchanges that State Street has launched is 42.