Hartford Funds’ defensive value ETF is outpacing the benchmark as volatility in the market is on the rise.
The Hartford Multifactor US Equity ETF (ROUS ) is helping to mitigate losses in the growing volatility environment. The VIX reached its highest in nearly seven months last Friday.
Equities have been challenged in the past month. ROUS is down 3.4% while the iShares Russell 1000 Value ETF (IWD ), which tracks the benchmark Russell 1000 Value, has dropped 5.1% in the past one-month period.
Investors in ROUS are still in the black year to date, as the defensive value ETF is up 2.0%. Meanwhile, the benchmark-tracking IWD is down 2.3% during the same period.
Over a five-year period, ROUS is up 43.2% and IWD has climbed 37.3%.
What Differentiates Defensive Value ETF ‘ROUS’
ROUS takes a multifactor approach to value investing. The Hartford Funds’ ETF seeks to target desired return-enhancing factors as well as to reduce exposure to unrewarded risk exposures.
“By incorporating quality metrics in addition to value ones, multifactor ETFs like ROUS provide a more defensive approach than peer products,” said Todd Rosenbluth, head of research at VettaFi.
The defensive value ETF importantly aims to outperform traditional cap-weighted indexes while reducing volatility by 15% over a full market cycle.
ROUS reduces concentration at the sector, market cap, and individual stock levels, which enhances diversification and limits concentration risk. The fund limits a single stock’s weight to 1.5% of the portfolio, giving ROUS a very different portfolio composition than many passive U.S. large-cap value peers.
Being overly concentrated at the company level introduces significant idiosyncratic company risk. In cap-weighted indexes, there is an overrepresentation of mega-caps, while persistently under-representing large-caps deeper within the universe. At the sector level, bubble events can enhance exposure at inopportune times.
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This article was prepared as part of Hartford Funds paid sponsorship with VettaFi. Hartford Funds is not affiliated with VettaFi and was not involved in drafting this article. The opinions and forecasts expressed are solely those of VettaFi. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, a recommendation for any product or as investment advice.