By Irish Life Investment Managers | Oct. 20, 2021
Ronan Bradley, Head of Quantitative Research

‘The greater the risk, the greater the reward’ – many believe that investing in riskier stocks will bring greater returns, but does that line up with the evidence over the long term? Irish Life Investment Managers (ILIM) argues that, over time, lower risk, less volatile stocks have provided higher returns and generated better risk-adjusted return outcomes than their riskier counterparts. 

But it’s easy to lose sight of that performance over the last year. Tech and growth-oriented stocks have led the recovery, while less risky firms tended to underperform. ILIM offers a history lesson in this short paper, reminding us how the ‘low volatility anomaly’ – a phenomenon where lower risk stocks tend to outperform riskier ones over time – has persisted for decades. While these stocks have traditionally traded at, or below, the average market valuation, they’ve been priced at a premium since the mid-2000s. With low-volatility stocks now trading at their lowest valuations since the end of the 2007-08 global financial crisis, ILIM highlights the opportunity for investors interested in active low volatility strategies.

Investors can access this approach through the Canada Life™ Global Low Volatility Fund, which is designed for investment in equity markets with lower negative market impacts and volatility over time compared to a conventional market-cap weighted equity portfolio. This feature makes an active low volatility fund a compelling choice for investors approaching or in retirement who want to participate in the market while minimizing the bumps in the road that occur over a typical market cycle. 

Read the full paper for more on why investors should consider active low volatility investing in global equity markets.

The views expressed in this commentary are those of this fund manager as at the date of publication and are subject to change without notice. This commentary is presented only as a general source of information and is not intended as a solicitation to buy or sell specific investments, nor is it intended to provide tax or legal advice. Although we endeavour to ensure its accuracy and completeness, we assume no responsibility for any reliance upon it.

This fund is available through a segregated funds policy issued by Canada Life or as a mutual fund managed by Canada Life Investment Management Ltd. offered exclusively through Quadrus Investment Services Ltd., IPC Investment Corporation and IPC Securities Corporation. Make your investment decisions wisely. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated. A description of the key features of the segregated fund policy is contained in the information folder. Any amount allocated to a segregated fund is invested at the risk of the policyowner and may increase or decrease in value.

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