In its first review of the funds, research house Lonsec has awarded “Recommended(Index)” ratings to the iShares Edge Smart Beta Minimum Volatility exchange traded funds (ETFs).
The two ETFs are the iShares Edge MSCI Australia Minimum Volatility ETF (ASX: MVOL) and the iShares Edge MSCI World Minimum Volatility ETF (ASX: WVOL).
MVOL and WVOL seek to deliver market-like returns with less risk, across Australian and global equities. The ETFs follow indices that screen for low volatility stocks, consider the correlations between stocks and include guardrails to limit sector and country concentrations. Importantly, the indices have lost less during downturns, when broad markets have suffered but have still captured meaningful gains during market upswings.
The “Recommended(Index)” rating indicates that Lonsec considers the iShares Edge MSCI Australia Minimum Volatility ETF to “offer a sound and inexpensive exposure to a portfolio of Australian equities designed to exhibit a lower volatility in returns relative to broad based market cap weighted portfolios”.
Furthermore, Lonsec considers the iShares Edge MSCI World Minimum Volatility ETF to “represent a relatively simple means for investors to gain an exposure to the global, developed equities markets. It would be difficult for investors to replicate the holdings of the fund with similar cost and administrative efficiency.”
Jon Howie, head of iShares Australia, noted that iShares has the most comprehensive range of smart beta ETFs listed on the Australian Securities Exchange (ASX), and commented that “iShares Edge Smart Beta ETFs are designed to provide Australian investors with a low cost way to strengthen portfolios by targeting outcomes such as reducing risk or enhancing returns.”
Mr Howie also said that the rating was timely for investors where “staying invested, regardless of market movements, is an important determinant of successful investing, but volatility can be unnerving”.
iShares ETFs utilise the portfolio and risk management expertise of BlackRock, and Lonsec also said: “BlackRock’s internally developed systems are sophisticated and highly integrated with implementation, compliance and risk management systems. These systems allow for trade aggregation, risk monitoring and efficient execution across BlackRock’s entire tradebook. Lonsec considers technology to be an important factor in establishing scale and minimising transaction costs needed for a successful passive index and /or ETF business.
“Lonsec believes the overall quality of BlackRock’s investment personnel and research effort to be very high.”
*The Lonsec Rating (MVOL assigned October 2016 and WVOL assigned October 2016) presented in this document is published by Lonsec Research Pty Ltd ABN 11 151 658 561 AFSL 421 445. The Rating is limited to “General Advice” (as defined in the Corporations Act 2001 (Cth)) and based solely on consideration of the investment merits of the financial product(s). Past performance information is for illustrative purposes only and is not indicative of future performance. It is not a recommendation to purchase, sell or hold BlackRock product(s), and you should seek independent financial advice before investing in this product(s). The Rating is subject to change without notice and Lonsec assumes no obligation to update the relevant document(s) following publication. Lonsec receives a fee from the Fund Manager for researching the product(s) using comprehensive and objective criteria.
For further information regarding Lonsec’s Ratings methodology, please refer to the website at: http://www.beyond.lonsec.com.au/intelligence/lonsec-ratings
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