Navigating the Low-Volatility Anomaly

Equity | June 2021

Notes from the Global Value Equity Desk

By Peter Hardy

Key Takeaways

  • The low-volatility anomaly is an investment phenomenon that challenges conventional stock market theories. Contrary to the belief that higher returns can only come with higher risk, the low-volatility anomaly shows that lower-risk stocks have historically generated superior returns with lower volatility.1
  • American Century Investments U.S. Value Yield strategy is a differentiated low-volatility portfolio featuring historically consistent lower risk and alpha generation characteristics.
  • There are multiple applications of this fundamental, quality-oriented, value-biased portfolio that seeks to provide income within a low-volatility investment context. The strategy can be a useful tool within defined benefit plans, defined contribution plans, insurance pools, endowments, and foundations.

Over the long run, stock portfolios with lesser variance in monthly returns have experienced greater average returns than their ‘riskier’ counterparts.


The Low Volatility Anomaly

Low-volatility investments have garnered significant interest from investors over the last several years. In this paper, we discuss the low-volatility anomaly, U.S. Value Yield’s proposition as a low-volatility portfolio, the differentiation of Value Yield in the low-volatility space, and client applications of the strategy.

Read the full report below.



The Case for U. S. Value Yield as a “Low Volatility” Portfolio

1Relative to the Russell 1000 Index.

No offer of any security is made hereby. This material is provided for informational purposes only and does not constitute a recommendation of any investment strategy or product described herein. This material is directed to professional/institutional clients only and should not be relied upon by retail investors or the public. The content of this document has not been reviewed by any regulatory authority.

Past performance is no guarantee of future results. Investment returns will fluctuate and it is possible to lose money.

The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.