Overcrowding puts low volatility indexes under pressure

Inflows increasing correlations and reducing performance, say traders


The soaring popularity of low volatility indexes among investors may be hurting the strategy's performance, according to traders.

Smart beta strategies have grown in importance in recent years, particularly among institutional and retail investors, with low volatility indexes attracting significant attention due to their smaller drawdowns and better performance compared with industry benchmarks. But traders warn that overcrowding into the strategies may be raising correlations and reducing index

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