As one would expect, the S&P 500 Low Volatility index's total return has lagged the S&P 500 index. Created in April 2011, the S&P 500 Low Volatility index produced a 12.3% annualized return over the last 10 years, trailing the S&P 500 index by about 250 basis points. The low-volatility index had a 1,350-basis-point gap over the past year.
Low-volatility fund performance gap narrows over time
The Low Volatility index, made up of the S&P 500 index's 100 lowest volatility stocks and rebalanced four times a year, has produced a lower standard deviation than the larger index. The 10-year standard deviation is about 15%, 240 basis points lower than the S&P 500.
At the end of May, the consumer staples sector was the largest weighting in the Low Volatility index at about 23% vs. 6% in the S&P 500. This was followed by the utilities, health care, industrial and financial sectors. The largest sector represented in the S&P 500 index is information technology with a 26% weighting. Health care, consumer discretionary, financials and communication services round out the top five. The top five sectors make up a similar 75% of each index.