Is low volatility a crowded trade?
Concerns have been raised about investors ‘chasing performance’ by investing more into expensive factors like volatility and could suffer from a sharp reversal of this trend. State Street Global Advisors offers a somewhat different view.
Recent commentaries have raised concerns about crowded trades that could adversely affect smart-beta strategies. The main argument is that investors have been ‘chasing performance’ by investing more into expensive factors like low volatility and that a sharp reversal of this trend (mean reversion) is likely to hurt portfolios. We, at State Street Global Advisors, think some aspects of this argument may be overstated.
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