Inflation fears continue to douse the market with volatility, and fund flows are showing that, especially when it comes to the Invesco S&P 500 Low Volatility ETF (SPLV ).
According to data from research firm CFRA, SPLV saw $1.1 billion in net inflows in the one-month period that ended on November 19. With just a little over 50% in large-cap value and large-cap blend equities (as of November 18), SPLV underscores investors’ preference for large-cap stocks in order to mitigate volatility risk.
The S&P 500 is up about 27% for the year, highlighting a strong comeback for equities after stumbling mightily during the apex of the pandemic sell-offs in 2020. However, that’s not to say that it’s been a steady climb back to record highs, with COVID-19 variants, rising yields, and inflation providing ample speed bumps along the way.
Heading into 2022, these risks still remain. Inflation, in particular, is weighing heavy on the minds of investors after the consumer price index (CPI) hit a three-decade high during the month of October.
“Heading into the final stretch of a strong year, with the S&P 500 Index up 27% year-to-date, we think it is reasonable that investors want to reduce the risk profile of portfolios while staying committed to large-cap stocks,” CFRA notes.
Adding More Tech to the Mix
Technology stocks can provide ample growth opportunities for investors, but they can also be associated with more volatility. However, CFRA notes that tech was actually less volatile in 2021, which could explain SPLV’s addition of more tech.
Speaking of less volatility, healthcare is also considered a relatively stable sector with respect to other sectors. To underscore tech’s lower volatility as of late, SPLV actually removed some healthcare names in favor of tech.
“SPLV added some Information Technology and removed some Health Care stocks last week. SPLV holds the 100 least volatile stocks in the S&P 500 Index, regardless of sector representation, on a quarterly basis,” CFRA says, noting that the fund added Cisco Systems and Microsoft as part of its holdings.
The fund is based on the S&P 500® Low Volatility Index and seeks to invest at least 90% of its total assets in common stocks that comprise the index. The index is compiled, maintained, and calculated by Standard and Poor’s and consists of the 100 stocks from the SP 500 Index with the lowest realized volatility over the past 12 months.
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