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 Largehttps://www.morningstar.com/authors/2118/daniel-sotiroff https://www.morningstar.com/authors/2118/daniel-sotiroff