In Times of Volatility, Slow and Steady Wins the Race, Says BlackRock Strategist
The iShares Edge MSCI Minimum Volatility USA ETF (USMV) - Get Report is up 12% thus far in 2016, outperforming the S&P 500 Index by over six percentage points. Martin Small, head of U.S. iShares at BlackRock (BLK) - Get Report , said the ETF's success is a clear demonstration that slow and steady wins the race.
"Building long-term wealth through investments is about time in the markets, it is not about market timing and that's what our minimum volatility product suite is all about," said Small. "The goal is achieving the market return over a full cycle with less volatility.
The yield on the USMV as of the end of the second quarter was approximately 2%. The ETF held 168 stocks at last check and charged an expense ratio of 15 basis points.
The iShares 20+ Year Treasury Bond (TLT) - Get Report is up 18% year-to-date as many investors, especially international ones, sought the safety of U.S. government bonds. The TLT tracks the investment results of an index composed of U.S. Treasury bonds with remaining maturities greater than 20 years. The TLT's yield at the end of June was 2.2%, and while that does not seem like much historically, it is still a huge step up from the negative yields in Europe and Japan.
"Asset allocators have used TLT forever as a bedrock hedging, safe-haven asset," said Small. "It's a way to zig when the S&P zags."
Speaking of volatility, the iShares MSCI United Kingdom ETF (EWU) - Get Report dropped 15% in the aftermath of the country's decision to exit the European Union. It has since halved those losses as global markets have rallied. Small said the EWU is a smart vehicle for investors betting on the future of the United Kingdom.
"I don't think Great Britain is going to stop trading with the rest of the world and I think it is going to be a vibrant economy over the long-term period," said Small.
On the flip side, the iShares MSCI Italy Capped (EWI) - Get Report has dropped 20% so far in 2016 due to worries about the country's banking system.
"I think there are some really interesting opportunities when you think about our iShares country funds, like a "Dogs of iShares" lineup where you have all these funds that have sold off in single countries, all these markets that have sold off north of 20%," said Small.