2020 has been very challenging with sharp underperformance and dispersion across low volatility implementation. How can we explain performance and positioning?
We conducted an independent factor decomposition of 6 Smart Beta ETFs to highlight significant structural exposures across implementations.
- Most Low Vol ETFs perform as bad or worse than the S&P 500 during the volatile period
- PLB Low Vol factor reflects Beta Compression and the subsequent sluggish recovery
- ETFs implementation of the Low Vol factor was, in most cases, far from consensus
- Exposure to mid/small-cap stocks (Size factor) hurts performance