Morningstar - Q3 2021 - 70

Strategies
A Smoother Ride
IShares MSCI Min Vol Global ETF reduces volatility with a
holistic approach.
Daniel Sotiroff
BEST IDEAS: PASSIVE
This article is adapted from the ETF's Morningstar Global Fund Report dated
June 23, 2021.
IShares MSCI Min Vol Global ETF ACWV is an attractive low-cost strategy
that uses a holistic approach to reduce volatility. Its proven ability to
cut back on risk and provide better risk-adjusted performance than a marketcap-weighted
index earns a Morningstar Analyst Rating of Silver.
The fund tracks the MSCI ACWI Minimum Volatility Index. It uses an optimizer
to select and weight stocks from the MSCI All Country World Index in
a way that minimizes expected volatility. It looks for names with low levels
of expected volatility, but it also considers how stocks behave relative to
one another. Therefore, it can own volatile stocks if their low correlations are
expected to reduce the portfolio's overall volatility.
This strategy also uses constraints to promote diversification. It limits individual
stocks to 1.5% of the portfolio, while country and sector weights are held
within 5% of their weight in the parent index. Turnover also gets capped
at 10% during each semiannual rebalance to mitigate trading costs. The final
portfolio holds less than one fourth of the stocks in its parent index. But
it still diversifies stock-specific risk. Just 12% of its assets are invested in its
10 largest names.
Low-risk strategies are attractive because they can provide a smoother
ride than a market index. The fund should lag the MSCI All Country World
Index during rallies but hold up better when the market declines. This
should outweigh the upside it sacrifices in bull markets and lead to better
risk-adjusted performance over the long haul.
This approach has worked well. The fund's volatility ran 28% lower than
the MSCI All Country World Index from its launch in October 2011 through May
2021. But it lagged the market during the rebound from the coronavirus
sell-off, causing its long-term total return to trail the index by 1.5 percentage
points per year over the same period. The fund's low 0.20% expense ratio
is another benefit that should provide a durable advantage. K
Daniel Sotiroff is a manager research analyst at Morningstar Research Services LLC.
Top 5 Regions 06/30/2021
Region
North America
Europe-Developed
Japan
Asia-Emerging
Asia-Developed
70
Morningstar Q3 2021
IShares MSCI Min Vol Global ETF ACWV
Stats 06/30/2021
Morningstar Analyst Rating
„
Total Assets
$5.1 Billion
Process
Above Avg
Growth of 10K 06/30/2021
$16K
iShares MSCI Global Min Vol Factor ETF
13.22
15.13
10
12
14
07/2018
Morningstar Global Markets Large Cap
07/2019
Morningstar Style Box 06/30/2021
Value Blend Growth
Snapshot as
of most recent
portfolio.
8
07/2020
Morningstar Ratings 06/30/2021
Period
Mstar
Return
3-Yr
5-Yr
Mstar
Risk
Below Avg Low
Low
Low
Morningstar Category
World Large-Stock Blend
3-Yr Annlzd Return
8.60%
Morningstar Pillars 06/30/2021
People
Above Avg
Parent
Above Avg
Expense Ratio
0.20%
3-Yr % Rank in Cat
92
Mstar
Rating
QQQ
QQ
10-Yr - - -
Overall Rating
QQ
■ Fund % ❙ Category Average %
12.7
14.4
5.6
10.9
4.4 9.2
4.2 7.6
20
40
60
80
55.9
62.6
Small Mid Large
https://www.morningstar.com/authors/2118/daniel-sotiroff https://www.morningstar.com/authors/2118/daniel-sotiroff

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Morningstar - Q3 2021 - Cover1
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