Low Volatility in Europe and Asia

“The rich, the poor, the high, the low Alike the various symptoms know”–The Influenza Winston Churchill, 1890

By this point, the infamous COVID-19 has made its way around the world and wreaked havoc through equity markets across the globe. We’ve already highlighted the value of protection in the U.S. and Canada.  Pandemics show no respect for international boundaries, so year to date charts for equity indices everywhere show very similar patterns and conclude with the same trajectory. Everyone started 2020 on a good note until the reality of the virus settled in.

We often say that the low volatility anomaly is universal, but it is rare that we see the strategy at work simultaneously in multiple markets.  The charts on the left below track year to date performance for the parent index in each region and the respective low volatility index. On the right shows the performance from the beginning of the year to the peak for each region and then the performance from the peak through March 16. In every market, the low volatility strategy has allowed for participation on the way up while offering protection on the way down.