Hedging Diversification Bets

Low volatility strategies were designed for times like the ones we’ve experienced so far in 2022. Year-to-date through March 31, 2022, equities have struggled. In the U.S., the S&P 500® was down 4.6% YTD. The S&P Developed Ex-U.S. BMI and the S&P Emerging Plus LargeMidCap fared even worse, plummeting 5.6% and 6.7% YTD, respectively.

Hindsight, of course, is 20/20, and we don’t know how emerging markets will perform relative to their developed counterparts going forward. Often, people look to international markets to diversify their home-country investments—and with good reason. The correlation between the S&P 500 and S&P Emerging Plus LargeMidCap over the past 25 years was 0.74. Diversification may be the “only free lunch in finance,” but the performance of emerging markets does tend to be more volatile—49% more volatile than the S&P 500, to be precise.

You can now read the full whitepaper at the link below