iShares launches four minimum volatility ETFs in Europe

BlackRock’s exchange traded funds platform iShares has launch four ETFs based on minimum volatility indices on the London Stock Exchange.

The launch is a response to growing volatility of the global equity markets since the onset of the financial crisis. All funds are optimised and physically backed and the first ETFs, domiciled in Europe, to be created on their respective indices.

Between 2007 and 2011, the MSCI Europe Index has seen daily moves of 2% up and down on average more than three times a month. In the previous three years this only happened around five times a year.

This high volatility of the equities market has scared many investors away from the asset class. But now they are in a difficult position, as traditionally safer bond investments are no longer producing the necessary returns.

The four new ETFs are the iShares MSCI Europe Minimum Volatility fund, the iShares MSCI World Minimum Volatility fund, the iShares MSCI Emerging Markets Minimum Volatility fund and the iShares S&P 500 Minimum Volatility fund.

iShares’ new funds will seek to offer reduced volatility compared to standard market-capitalisation weighted indices in a range of global markets. The total expense ratio is between 20 and 40 basis points.

Stephen Cohen, head of iShares investment strategies & insights EMEA, said: “These new funds are suitable for investors looking for a smoother ride in today’s investment world. [They] aim to offer an attractive investment over the longer term with the potential to provide a better trade-off between risk and return, something that simply holding cash does not do.”

Cohen continued to say iShares sees client demand for new and diversified sources of yield and solutions for navigating today’s markets, and seeks to respond to this. Its new funds aim to reduce overall portfolio risk, without introducing significant bias by country, sector or style.

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