Hartford Funds has added onto its line of smart beta, multi-factor exchange traded funds to gain exposure to global equities that have exhibited lower levels of volatility as a way to help investors limit drawdowns and still participate in any upside potential.
On Thursday, Hartford Funds launched the Hartford Multifactor Low Volatility US Equity ETF (BATS: LVUS) and Hartford Multifactor Low Volatility International Equity ETF (BATS: LVIN). LVUS has a 0.29% expense ratio and LVIN has a 0.39% expense ratio.
“These strategies arrive at a time when market volatility is top-of-mind for investors,” Darek Wojnar, Head of ETFs at Hartford Funds, said in a note. “They were designed to reduce volatility for investors pursuing long-term growth potential while introducing positive exposure to other potentially return-enhancing factors such as value, momentum, quality and size.”
LVUS tries to reflect the performance of the Hartford Multifactor Low Volatility US Equity Index, which tries to outperform a U.S. cap-weighted universe with up to one quarter less volatility over a complete market cycle, while LVIN tries to reflect the performance of the Hartford Multifactor Low Volatility International Equity Index, which is designed to outperform a capitalization-weighted universe of developed and emerging markets located outside the U.S. with up to one quarter less volatility over a complete market cycle.
Both indices will seek out securities with low volatility characteristics from a broad universe. Moreover, the indices include other screens, including an optimization process that seeks diversification by applying minimum and maximum weightings of equity securities across a variety of measures, including sector, company, size, and other factors. The optimization process also seeks to avoid unintended factor risks by maintaining neutral to positive exposure to other potentially return-enhancing factors such as value, momentum, and quality at the portfolio level.
The low-volatility strategy is “designed to reduce risk at the core of a portfolio and to complement more aggressive components of an overall portfolio,” according to Hartford Funds.
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