Equities Low Volatility - celebrates five-year birthday with five Morningstar stars

15.01.2019

Five years ago, Jyske Capital launched the Equities Low Volatility strategy. Since inception in December 2013, the strategy has realized a total return of more than 67%, corresponding to an excess return of approximately 16 percentage points compared to the global equity market. The return is achieved with a lower risk than the market as a whole – i.e. a lower standard deviation and a beta significantly below 1. Due to these accomplishments, Morningstar has recently awarded the strategy five stars[1]. Five stars is awarded solely to strategies with a risk-adjusted return in the top 10% among global equity strategies in Europe.

Positive return in 2018 despite a falling global equity market

The investment year 2018 was very turbulent, and with a return of -4.63% this was the first year with a negative return for the global equity market since 2011. It is therefore very satisfying that Equities Low Volatility was able to realize a positive return of 2.17% in 2018, corresponding to an excess return of 6.80 percentage points compared to the global equity market. The strategy has thus once again proved that investors can expect a better protection of wealth in volatile and declining markets. This is the consequence of the lower risk compared to the global equity market as well as the higher exposure to defensive sectors.

Better protection of wealth in down markets

Since inception of the strategy, there have been two major corrections to the global equity market. The first occurred in 2015/16 and the last at the end of 2018, where global equity markets fell by 23% and 15% from top to bottom respectively. During both of these corrections, investors has experienced a significantly better protection of wealth, as Equities Low Volatility has only fallen by about two-thirds of the decline in the global equity market. The advantage of a lower drawdown – besides a better protection of wealth – is that the investor typically recovers the loss faster. For instance, during the 2015/16 correction, it took around ten months from the bottom in February 2016 to recover the loss if one had invested in the global equity market. If one had invested in Equities Low Volatility, it would only have taken around five months – i.e. half the time. The strategy thus wins by not losing as much as the global equity market in down markets – we call it “winning by not losing”.

Drawdown profile – Equities Low Volatility vs the global equity market

Note: Based on the fund “Jyske Invest Aktier Lav Volatilitet” for the period January, 2014 to December, 2018 and before costs Source: Jyske Capital



[1] Based on the category ”Equity – Global Large Cap Blend”