Summary
- The State Street SPDR US Large Cap Low Volatility Index ETF offers broad sector diversification and mitigates S&P 500 concentration risk.
- Despite its lower concentration risk, LGLV’s low-volatility stock selection does not translate to meaningful downside protection or l…
Summary
- The State Street SPDR US Large Cap Low Volatility Index ETF offers broad sector diversification and mitigates S&P 500 concentration risk.
- Despite its lower concentration risk, LGLV’s low-volatility stock selection does not translate to meaningful downside protection or lower portfolio risk during market drawdowns.
- LGLV trades at lower multiples and offers a higher yield than SPY ETF, but has slower expected EPS growth.
- Despite remaining a commendable investment vehicle, LGLV is a probably won’t present the downside protection and lower beta risk, many might believe it to.
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This article provides coverage of the State Street® SPDR® US Large Cap Low Volatility Index ETF (LGLV). I initially looked at the ETF with the thought of buying it as a means of avoiding the
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Quick Insights
LGLV is significantly less concentrated, with top holdings each below 1.5% and only 12% in Information Technology, versus SPY’s 34% tech weighting and 25% in its top five stocks.
Regression analysis shows LGLV does not deliver downside convexity or lower risk versus SPY during market drawdowns; its beta rises and its convexity collapses with volatility, negating its low-volatility premise.
LGLV offers lower headline multiples (P/E 20.38, P/B 3.41), a higher yield (1.87%), but slower expected EPS growth (8.42%) compared to SPY’s higher growth and valuation.