A complementary approach to low volatility investing

As we move deeper into 2021, the spectre of market turbulence remains, and low volatility strategies remain in demand. However, their performance has underwhelmed, and we believe there is an alternative approach that can meet investor objectives.

Mar 15, 2021

4 minutes

Clyde Rossouw
Elias Erickson
Bradley George
As we move deeper into 2021, the spectre of market turbulence remains, and low volatility strategies remain in demand. However, their performance has underwhelmed, and we believe there is an alternative approach that can meet investor objectives.

Markets have had a choppy year, encouraging investors to seek lower volatility strategies that offer protection during down markets and smooth returns over a cycle. Yet, such strategies have not performed as desired, lagging the market significantly this year, as they have for much of the past decade.

We believe institutional investors would benefit from exploring strategies that offer attractive returns while maintaining a low level of volatility by selecting best-in-class businesses that sustain high returns, low leverage and compound shareholder wealth over the long term. Such an approach can also offer exposure to key long-term growth themes; Ninety One’s success at identifying these opportunities can be evidenced by the Global Franchise strategy’s long-term outperformance of the broader market and low volatility alternatives.

Defensive alpha is a key attribute of the Strategy, with its performance during the biggest equity drawdowns outperforming not only the wider market, but often the median global low volatility managers as well. This fundamentally-based, high-conviction equity portfolio – which is not a dedicated low volatility approach – can act as a complement to quantitative low volatility strategies, providing institutional investors with excess returns, lower risk and a smoother journey through a cycle.

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Specific risks:

All investments carry the risk of capital loss. The value of investments, and any income generated from them, can fall as well as rise and will be affected by changes in interest rates, currency fluctuations, general market conditions and other political, social and economic developments, as well as by specific matters relating to the assets in which the investment strategy invests. If any currency differs from the investor’s home currency, returns may increase or decrease as a result of currency fluctuations. Past performance is not a reliable indicator of future results.
Clyde Rossouw
Co-Head of Quality
Elias Erickson
Portfolio Manager
Bradley George
Investment Director - Equities

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