Bringing you live news and features since 2006 

Question marks

VelocityShares publishes report to help investors understand alternative weighting strategies


In response to the growing interest in low volatility investing, VelocityShares, a specialist in designing exchange-traded products and tail-risk strategies for institutional investors, has published “Alternative Index Weighting and the Impact on Portfolio Risk” to help investors assess the benefits and pitfalls of alternative weighting strategies.

The paper reveals that investors who are trying to overweight low volatility stocks face large variation in the embedded risk among popular approaches.
“Many investors do not realise that so called ‘low volatility’ weighting only leads to a low volatility portfolio under an unrealistic set of assumptions,” says Scott Weiner, head of quantitative strategy at VelocityShares. “Many alternative equity weighting schemes intend to capture the low volatility anomaly, but not all approaches deliver the desired results.”
It is well known that market capitalisation weighted portfolios are not themselves mean-variance efficient, and there has been a growing interest in trying to capture the low volatility anomaly. VelocityShares’ new paper finds that popular alternatives, such as equal and low volatility weighted approaches, have high idiosyncratic risk and are themselves only mean-variance efficient under unreasonable assumptions.
The paper concludes that equal risk weighted and minimum variance approaches produce lower volatility portfolios. The equal risk weighted approach does so with less idiosyncratic risk. Additionally, the paper reviews the assumptions behind the many lower volatility approaches that have been become popular in the market.

Latest News

Digital asset manager CoinShares International Limited has announced the launch of its hedge fund division, CoinShares Hedge Fund Solutions...
Despite a small contraction in assets caused by a complex market and macroeconomic scenario in Europe and at the global..
State Street Global Advisors, the asset management business of State Street Corporation, has published the results of its Gold ETF..
HANetf has announced that Sprott Uranium Miners UCITS ETF (URNM) has reached USD108.18 million AUM for the first time since..

Related Articles

Kristof Gleich, Harbor Capital
Harbor Capital burst onto the ETF issuance world in 2021 and now has USD1.1 billion in assets in ETFs. But...
Europe’s thematic ETF provider, Rize ETF, has been acquired by ARK Invest LLC, the parent of ARK Investment Management LLC,...
Jeff Ringdahl, Resolute Investment Management
End of August saw the launch of alternatives firm Man Group’s first ETF, using its AHL systematic trading system to...
Arne Noack, DWS
July saw the launch of DWS Group’s Xtrackers US Green Infrastructure Select Equity ETF (NASDAQ: UPGR) designed to offer both...
Subscribe to the ETF Express newsletter

Subscribe for access to our weekly newsletter, newsletter archive, updates on the site and exclusive email content.

Marketing by