Low-volatility ETFs Avoid Market Selloff, Posting Smaller Daily Drop

The biggest exchange-traded funds offering low-volatility strategies passed a high-profile test on Wednesday, as they held up relatively well in the face of a broad-market selloff, which saw equity benchmarks suffer the biggest daily drops in months and as volatility spiked. The PowerShares S&P 500 Low Volatility Portfolio fell less than 0.1% on the day while the iShares Edge MSCI Min Vol USA ETF lost 0.2%. The S&P 500 sank 1.3% in its biggest one-day decline since March. The CBOE Volatility Index surged nearly 25% on the day. U.S. stocks were broadly pressured as the latest political turmoil out of Washington weighed on investor sentiment and cast new doubts on whether President Donald Trump would be able to pass his economic agenda. Low-volatility ETFs are designed to deliver broad-market exposure with a bias towards the names that have recently seen the smallest daily moves. Investors use them to limit their downside in periods with steep declines.