Global Exposure The Low Vol Way (EFAV, IDLV)

Intense global macroeconomic and headline risk have led the financial markets to turn on a dime in recent months. What appears to be increased volatility is a primary reason why so many investors may be flocking to sectors prized for low correlations and lack of volatility, such as consumer staples and utilities. Rising volatility also helps explain the success of some low volatility ETFs, such as the PowerShares S&P 500 Low Volatility Portfolio SPLV. Just over a year old, the ETF has nearly $2 billion in assets under management, and its success has spawned the creation of scores of other low volatility ETFs. Investors looking for low volatility funds with international exposure have an expanding array of choices too - including the iShares MSCI EAFE Minimum Volatility Index Fund EFAV and the PowerShares S&P International Developed Low Volatility Portfolio IDLV. Both funds earned Marketweight ratings from S&P Capital IQ in a recent research note published by the firm. S&P Capital IQ Chief Equity Strategist Sam Stovall highlighted in the note that the S&P 500 Index was down 0.4% in the one-year period ended May 2011, but had risen 15% over the three-year period. Meanwhile, the S&P 500 Low Volatility Index, which consists of the 100 stocks in the broader Index with the lowest 12-month standard deviations, was up 8.4% and 18% in the same respective time periods, according to the note. "When we look overseas at the S&P Developed ex- U.S. & South Korea LargeMidCap Index, we see a similar pattern. This broad index was down 20% in the one-year period ended May 2012 and up just 4.2% in the three-year period. Meanwhile, the S&P BMI International Developed Low Volatility Index, which consists of the 200 less volatile stocks in the broad index, was down just 7.2% and up 9.2%, respectively," S&P Capital IQ said. The PowerShares S&P International Developed Low Volatility Portfolio debuted in January and charges 0.25 percent per year, with $5.1 million in AUM. The fund is home to 203 stocks with consumer staples, financials and industrials leading the way at the sector level. Combined, those three groups account for 58% of its sector weight. The ETF offers exposure to 10 countries, all of which are developed markets, but that lineup is dominated by Japan with an allocation of 43.2 percent and Canada with a weight of 16.5 percent. Other countries represented include Singapore, New Zealand and the U.K. The iShares MSCI EAFE Minimum Volatility Index Fund debuted last October and is slightly cheaper than its PowerShares rival with fees of 0.2 percent per year. The ETF has $50.1 million in AUM and is home to 174 stocks. Five sectors – staples, financials, health care, industrials and telecommunications – receive double-digit allocations within the fund. The ETF features exposure to 20 countries, but that lineup is dominated by the U.K., Japan, and Switzerland - the trio combines for two-thirds of EFAV's weight. The fund features a 6.83% 30-day SEC yield, according to iShares data. For more on low volatility ETFs, click here.