Scientific Beta

Enterprising Investor forum, CFA Institute: "Low volatility equity strategies appeal to investors for many reasons. First, they help keep our portfolios invested in equities during periods of market turmoil. Second, when well-constructed, they often exhibit higher risk-adjusted returns than their higher volatility counterparts. While general surveys of low volatility strategies show that they do indeed shield investors from market-driven risk, what is frequently overlooked is that these same strategies can be insufficiently diversified or risk controlled."

Enterprising Investor forum, CFA Institute 18/01/2024

Article by Joseph Simonian, PhD, senior investment strategist at Scientific Beta

"(...) Low volatility equity strategies appeal to investors for many reasons. First, they help keep our portfolios invested in equities during periods of market turmoil. Second, when well-constructed, they often exhibit higher risk-adjusted returns than their higher volatility counterparts. While general surveys of low volatility strategies show that they do indeed shield investors from market-driven risk, what is frequently overlooked is that these same strategies can be insufficiently diversified or risk controlled. To that end, we will examine the critical components of an effective low volatility portfolio construction process. These elements enable the construction of low volatility portfolios with more diversification and significantly better risk-adjusted returns than the standard low volatility strategy. (...)"