Boomers Fueling a Boom In Low-Volatility ETFs

Soon-to-be-retirees want the upside of equities without the swings.

Baby boomers worrying about whether they'll have enough cash to bankroll their retirements are one reason low-volatility ETFs are, well, booming, according to Dan Draper, head of Invesco PowerShares, which runs one of the biggest such funds.

The PowerShares S&P 500 Low Volatility ETF has grown by about $1 billion this year and beaten the S&P 500 Index by more than two percentage points. The iShares Edge MSCI Minimum Volatility USA ETF has taken in $5.3 billion—that's more than any other equity-focused ETF (and second to the giant SPDR Gold Shares fund among all ETFs).

Boomers are living longer, meaning they're looking to stocks to get some capital appreciation, said Draper. At the same time, they're worried about a 2008-style meltdown, especially after the 10 percent drop that greeted S&P 500 investors at the start of this year. That makes buying lower-volatility stocks "extremely attractive" for this demographic, said Draper.

Of course, it could all be an epic over-reaction. Cash continues to flow into these ETFs, but actual market volatility, as measured by the VIX, remains a third below its 10-year average.


A version of this story originally appeared in Bloomberg Brief: ETFs.

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