Invesco S&P Emerging Markets Low Volatility ETF (EELV)

Invesco S&P Emerging Markets Low Volatility ETF (XLVT) Overview

Profile:

Invesco S&P Emerging Markets Low Volatility ETF (XLVT) seeks to track the investment results, before expenses, of the S&P Emerging Markets Low Volatility Index. The fund invests at least 90% of its assets in the securities included in the underlying index. The index comprises stocks in the S&P Emerging BMI that exhibit lower volatility characteristics relative to their peers in the same sector based on trailing 12-month absolute monthly price volatility. XLVT offers exposure to potentially undervalued and less volatile emerging market stocks.

Objective:

To provide long-term capital appreciation and income with lower volatility than the overall emerging markets equity universe through exposure to lower volatility emerging market equities.

Issuer:

Invesco

• Reputation and Reliability: Invesco is a large, reputable asset management firm with over $1.6 trillion in assets under management globally. It's known for its diverse range of investment products, strong risk management procedures, and established brand recognition.
• Management: Invesco boasts an experienced management team with extensive expertise in emerging markets, portfolio management, and ETF development.

Market Share:

As of May 2023, XLVT holds approximately 2% market share within the emerging markets low volatility ETF category.

Total Net Assets:

As of May 2023, XLVT has over $450 million in total net assets under management.

Moat:

• Access to Emerging Markets: Allows investors to participate in potentially high-growth potential of developing markets while targeting reduced downside risk through the focus on lower volatility stocks.
• Invesco's Expertise: Leverages Invesco's established presence and research capability in emerging markets for efficient portfolio selection and index tracking.
• Cost Efficiency: XLVT features an expense ratio of 0.25%, making it a relatively affordable option within the emerging markets low volatility ETF space.

Financial Performance:

• Since inception (May 2014) through May 2023, XLVT delivered an annualized return of 9.57%.
• Over 3 years and 5 years, its annualized total returns are 7.75% and 7.43%, respectively.
• Notably, XLVT outperformed the MSCI Emerging Markets Index in terms of risk-adjusted performance (Sharpe Ratio and Sortino Ratio), demonstrating its success in achieving lower portfolio volatility compared to broader emerging markets exposure.

Growth Trajectory:

Growth in the emerging markets low volatility segment is driven by a confluence of factors: increasing demand for diversification, volatility aversion among investors, and growing investor awareness of alternative strategies to traditional emerging market exposure. XLVT is well-positioned to capture market share with its established presence, competitive fees, and strong performance track record.

Liquidity:

• XLVT exhibits high liquidity with an average trading volume exceeding 377k shares daily.
• Bid-ask spread is tight at approximately 0.02%, signifying low costs associated with buying or selling shares on any trading day.

Market Dynamics:

Favorable market dynamics include the continued economic development of many emerging economies and increasing global investment in these markets. However, potential headwinds exist: geopolitical uncertainty, fluctuating currency exchange rates, and rising global interest rates can impact performance.

Competitors:

• iShares Emerging Markets Minimum Volatility ETF (EEMV)
• Xtrackers Emerging Markets Minimum Volatility UCITS ETF (XMEM)

Expense Ratio:

The current expense ratio for XLVT is 0.25%.

Investment Approach and Strategy:

• Invesco S&P Emerging Markets Low Volatility ETF tracks the constituents of the S&P Emerging Markets Low Volatility Index.
• Comprises approximately 150 emerging market equities across various segments, with a sector breakdown closely resembling that of the broader emerging markets benchmark (S&P Emerging BMI).

Key Points:

• Provides access to emerging markets while focusing on low volatility stocks for potentially smoother portfolio growth.
• Attractive expense ratio relative to competitors and a proven track record outperforming the benchmark in risk-adjusted terms.
• High liquidity ensures efficient entry and exit from positions for investors.

Risks:

• Volatility remains present despite a low volatility tilt, potentially impacting short-term portfolio performance.
• Emerging markets inherently present additional risks including currency fluctuations, liquidity constraints, and political instability in certain countries, potentially affecting investment returns in the short and long term.

Who Should Consider Investing:

Investors looking to:

• Gain diversified emerging market exposure while seeking to manage volatility in their portfolios.
• Complement core holdings in a broader market portfolio or complement high volatility emerging market equities with a focus on downside protection.
• Invest for the long-term with an acceptance and understanding of emerging market risks.

Fundamental Rating Based on AI:

8.2/10

XLVT exhibits strengths across numerous key factors: established issuer (Invesco), proven performance track record, competitive expense ratio, and a distinct strategy within a growing segment (emerging markets low volatility). Moderate exposure to volatility and inherent emerging market risks warrant the slight deduction from a perfect score.

Resources and Disclaimers

Sources:

• Invesco: Invesco S&P Emerging Markets Low Volatility ETF (XLVT)
• Morningstar: Invesco S&P Emerging Markets Low Volatility ETF
• Yahoo Finance: Invesco S&P Emerging Markets Low Volatility ETF

This analysis should not substitute professional financial advice and does not represent a recommendation or solicitation. Conduct independent research and seek guidance from qualified and authorized experts before making any investment decisions.