An ETF Strategy to Manage Global Risks in Late Cycle

As the U.S. heads deeper into the late market cycle, investors will be faced with increased volatility and should consider exchange traded fund strategies that help diminish the risks.

“What we’re experiencing as investors is the potential for volatility to strike any time,” Alex Piré, Head of Client Portfolio Management at Seeyond, said at the Morningstar Investment Conference. “Now, what we’ve identified at Seeyond, and we deal with human behavioral issues on a day-to-day basis – that’s how we build a lot of the strategies, is that there’s really two main fears that sort of are exhibited, if you will, by investors: One is the fear of missing out, and that’s usually on the upside… The second one, and that’s a really probably a sharper one or tougher one to harness, is the fear of loss.”

As a way to better manage potential market risks down the road, investors may turn to actively implemented quantitative strategies that try to provide better exposure to the changing market conditions. For example, Natixis Investment Managers has come out with the Natixis Seeyond International Minimum Volatility ETF (MVIN) that have adapted time-tested strategies into dynamic ETF strategies.

MVIN focuses on developed markets and try to generate long-term capital appreciation with less volatility than typically experienced by international equity markets – the minimum volatility approach helps diminish portfolio risk.

The international minimum volatility fund utilizes both quantitative and qualitative factors to identify securities with lower volatility and a reduce the ETF’s overall volatility relative to the developed international equity market. The fund managers will screen for volatility of each individual equity security and correlation of each individual equity security to all other equity securities in the investment universe of international developed stocks.