• While low-volatility equities generally exhibit low absolute risk, they can sometimes outperform or underperform by large margins for extended periods of time.
  • We can’t know anything for certain about the future, but history suggests that low-volatility equity investments can help to mitigate portfolio losses during equity-market drawdowns.

The merits of low-volatility investment strategies have been understood for quite some time. In fact, SEI helped pioneer the approach, having launched our first strategy in the space in 2004—after our own research1 found that lower-volatility stocks not only experience considerably less volatility and lower declines than equities as a whole, but also may even deliver market-like returns over time.

We have found this makes low-volatility equities particularly attractive for investors who care primarily about absolute risk, meaning they are more concerned about the risk of losing money than the risk of underperforming a market index. For example, individuals focused on avoiding losses exceeding a certain amount (say, 10% or 20% of the portfolio’s value), may find low-volatility strategies especially compelling.

However, the utility of low-volatility strategies can extend beyond the most conservative portfolios. Even the most aggressive investors may benefit from an allocation that’s designed to dampen portfolio volatility.

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Important Information
This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Positioning and holdings are subject to change. All information as of the date indicated. This information should not be relied upon by the reader as research or investment advice, (unless you have otherwise separately entered into a written agreement with SEI for the provision of investment advice) nor should it be construed as a recommendation to purchase or sell a security. The reader should consult with their financial professional for more information.
Statements that are not factual in nature, including opinions, projections and estimates, assume certain economic conditions and industry developments and constitute only current opinions that are subject to change without notice. Nothing herein is intended to be a forecast of future events, or a guarantee of future results.
Certain economic and market information contained herein has been obtained from published sources prepared by other parties, which in certain cases have not been updated through the date hereof. While such sources are believed to be reliable, neither SEI nor its affiliates assumes any responsibility for the accuracy or completeness of such information and such information has not been independently verified by SEI.
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