BlackRock Minimum Volatility ETF Has Bled Cash Every Day in 2021

(Bloomberg) -- Investors have minimized the love for BlackRock Inc.’s minimum volatility exchange-traded fund.

The firm’s $30 billion iShares MSCI USA Min Vol Factor ETF (USMV) is steadily bleeding cash, totaling $3.5 billion in losses so far this year, according to data compiled by Bloomberg. That’s on top of $4.6 billion pulled in 2020.

These outflows stand in stark contrast with the overall U.S. ETF market, which has already taken in $113 billion in the first five weeks of the year -- more than the entire third quarter in 2020. But products following a low-volatility strategy have become the least-loved sector of the smart beta universe, after failing to protect against market swings last year.

“Investors had been piling into those funds prior to the Corona crash, and when that came, those funds were down as much or more than the market and that turned some investors off,” said Nate Geraci, president of the ETF Store, an advisory firm.

Overall, funds implementing the strategy -- in which investors overvalue volatile equities and undervalue stocks that fluctuate less -- have lost almost $5 billion this year, after facing $13.3 billion in outflows last year.

There’s also the growing reflation trade, which has been spurred by ongoing vaccine rollouts, expectations of further federal fiscal aid and largely positive earnings reports -- all sending equities to all-time highs.

“It’s just been a story where flows are going into those riskier segments of the market, higher beta versus pursuing low-vol strategies,” Geraci said.

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