Algorithmic trading volatility has also increased since the global financial crisis, contributing to more downside volatility, according to a December blog post written by Mr. Hunstad on the likelihood of higher volatility ahead. The blog post also noted that uncertainty around central bank policies also impacts volatility levels.
Northern Trust Asset Management was among the 25 largest money managers of low-volatility equity AUM reported as U.S. institutional tax-exempt assets managed internally. As the 19th largest manager in this universe, Northern Trust had $454 million in assets, up 241.4% over the year ended Dec. 31.
The three largest money managers of assets in this universe were, respectively, BlackRock Inc., New York, with $62.2 billion in assets, up 12.6% over the year; Parametric Portfolio Associates LLC, Seattle, with $16.5 billion, up from $394 million; and Sydney-based MFG Asset Management Ltd., with $9.1 billion, up 27.2%.
For much of the first quarter of 2020, the S&P 500 Low Volatility Total Return index topped the S&P 500 Total Return index, while returns for both indexes have largely remained negative since late February. The low-vol index was down 18.97% in the first quarter, opposed to a 19.6% drop for the S&P 500. By mid-April, however, the S&P 500 began to outperform the low volatility index. As of May 27, the S&P 500 has somewhat rebounded to a -5.25% year-to-date return, while the low volatility index returned -14.86%.
In comparison, last year the low volatility index returned 28.26%, while the S&P 500 returned 31.48%.
Marlena Lee, head of investment solutions at Austin-based Dimensional Fund Advisors LP, said there has been a broader interest in factor-based strategies among investors, which can include a low-volatility approach.
"I do think that there's just a year-over-year increase in the interest and assets flowing to these strategies. Over the last decade, there's been up years and down years. I think it's a little bit independent of performance," Ms. Lee said.
For institutional investors looking to insulate their portfolio from market volatility, there are various ways to achieve that, including through fixed-income factor-based strategies, she added.
Dimensional was the largest manager of factor-based strategies for the year ended Dec. 31, with $598.6 billion in worldwide assets in this universe, up 18.3% over Dec. 31, 2018, P&I's annual survey found.