Guggenheim’s Minimum Volatility strategy seeks to achieve a smoother pattern of returns that, over time, are similar to or slightly better than traditional equity benchmarks. Our portfolios are constructed to benefit from empirical evidence that demonstrates the historical outperformance of low-volatility stocks, a market inefficiency known as the low volatility effect.
Nardin Baker created and implemented one of the first low volatility portfolios in 1988 and his 1991 research paper, The Efficient Market Inefficiency of Capitalization-Weighted Portfolios, published in the Journal of Portfolio Management is largely cited as proof of the low volatility effect.
We maintain a data library with information on more than 30,000 global equities. Our sophisticated volatility models and optimization technology allow us to perform dynamic research and work closely with clients to solve their specific return and risk objectives. Our minimum volatility portfolios are customizable by region (including U.S., global, and emerging markets) and are optimized in an investor’s domestic currency to reduce currency-related volatility.
Outperformance Potential in Down Markets
Minimum volatility portfolios consist of stocks with historically low volatility and characteristics that tend to position them for stable near-term growth. As a result, the strategy has historically underperformed during periods of excessive optimism in broader stock markets but outperformed during market downturns. This combination of performance may help minimum volatility portfolios produce superior risk adjusted returns over the long term.