The first three of Victory Capital’s VictoryShares volatility weighted ETFs have achieved their three-year track records and earned 5-Star Overall Morningstar Ratings in their respective categories, as of 31 July, 2017.
The ETFs, which track the firm’s proprietary CEMP volatility weighted indexes, use a rules-based approach to seek to outperform traditional market cap weighted indexing strategies. The ETFs are: the VictoryShares US 500 Volatility Wtd ETF (CFA); the VictoryShares US 500 Enhanced Volatility Wtd ETF (CFO); and the VictoryShares US EQ Income Enhanced Volatility Wtd ETF (CDC).
CFA and CFO ranked in the top 10 per cent of 1,233 qualified Large Blend funds over three years as of 31 July, 2017, while CDC ranked in the top 1 per cent of the 1,100 qualified Large Value funds for that same period.
Traditional market cap weighted indexes are typically dominated by the performance and risk profile of a handful of mega-cap companies. The CEMP volatility weighted indexes address that concentration challenge by weighting the stocks in the index based on volatility (standard deviation over the past 180 trading days), thereby offering broader exposure to the entire market. Additionally, to be included in the index, a company must maintain four consecutive quarters of positive earnings.
“We’re pleased to be able to provide our clients with an alternative to traditional market cap weighting,” says Mannik Dhillon, President, VictoryShares and Solutions. “We’ve developed a rules-based approach to investing in profitable companies and weighting them based on their volatility that seeks to outperform the S&P 500 Index with less risk. The strong results that we have been able to deliver through CFA, CFO and CDC serve as solid evidence that our methodology is working.”
The VictoryShares volatility weighted approach differs from competing methodologies that invest in low volatility companies. Instead, the indexes use volatility as a weighting mechanism to seek to achieve broad-market diversification. Over the past three years, Victory Capital has extended the approach beyond the US broad market to provide investors with volatility weighted solutions that seek to provide exposure to high dividends as well as international and emerging markets.