Get Low Vol While Holding Global Exposure With IDLV

March 18, 2022 GeneAka Investment Comments Off

With Russia’s invasion of Ukraine, investors who want international exposure may feel compelled to stay on the sidelines. However, there are options to stay invested while mitigating volatility.

Geopolitical events are certainly a nuance of international investing. The crisis in Ukraine certainly underscores that component as long as investors are willing to accept the risk.

“The geopolitical event that is taking place in Russia serves as a stark reminder of the risks we must account for in the investing world,” an Entrepreneur article says. “One of the risks of international investing is what is known as country risk, or the risk arising from uncertainty associated with investing in a particular country.”

That said, investors don’t need to accept an inordinate amount of risk to get international equities exposure. After all, there are still attractive options for growth prospects, and investors shouldn’t be deterred by what’s going on in one nation while ignoring other opportunities.

Rather than take separate hedging positions, investors can get a low-volatility feature using the Invesco S&P International Developed Low Volatility Portfolio (IDLV A-). The fund’s top country allocations, as of March 4, include Canada, Japan, and Singapore — all three comprising just over 40% of the fund’s assets.

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IDLV is based on the S&P BMI International Developed Low Volatility Index™. The index is compiled, maintained, and calculated by Standard & Poor’s Dow Jones Industrial and measures the realized volatility of the index’s 200 constituents over the trailing 12 months and weights constituents so that the least volatile stocks receive the highest weights.

Top sector allocations include financials, consumer staples, and utilities. In order to mute volatility, equities are skewed towards large-cap value and a large-cap blend focus.

Furthermore, the fund is never over-concentrated in certain equities. The largest holdings don’t exceed 1.05% of the fund’s assets.

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