Persistent Volatility: Continued market uncertainty sets up well for low volatility; controlling sector risks and adding quality to anchor the portfolio to strong fundamentals is especially important.
More Effective De-Risking: Both stocks and bonds have elevated volatility leaving asset class shifts less effective in reducing portfolio volatility. A low volatility approach to equity fulfillment may be an effective choice to achieve lower portfolio volatility.
Importance of Risk Controls: Low volatility strategies may vary significantly with regards to risk controls. Left unchecked, low volatility portfolios can have concentrations to sector, region, and macro-economic risk. The index is constructed to limit exposure to such uncompensated risks.
SEEKING TO OVERCOME LOW VOL'S LIMITED UPSIDE CAPTURE
Down Market Capture Ration: 74% | Up Market Capture Ratio: 87%
|Average Performance in Down Months||Average Performance in Up Months|
|NT Quality Low Volatility Index||-3.22%||NT Quality Low Volatility Index||2.79%|
|Russell 1000||-4.36%||Russell 1000||3.22%|
Source: Refinitiv, Bloomberg. Graph shows monthly performance of NT Quality Low Volatility Index and Russell 1000 Index from 01/31/2014 - 09/30/2022. Down (up) markets are defined as any monthly period when the Russell 1000 Index experienced negative (positive) performance. Arithmetic average is used. Index performance returns do not reflect any management fees, transaction costs or expenses. Past performance is not indicative or a guarantee of future results. Index performance returns do not reflect any management fees, transaction costs or expenses. It is not possible to invest directly in any index.
Downside capture measures how much performance loss a fund captures relative to a benchmark index in down markets.
Upside capture measures how much performance gain a fund captures relative to a benchmark index in up markets.
Alpha is the excess return of an investment relative to the return of a benchmark index.
Northern Trust Quality Low Volatility Index tracks a portfolio of is designed to reflect the performance of a selection of companies that, in aggregate, possess lower overall absolute volatility characteristics relative to the Northern Trust 1250 Index.
Russell 1000 Index is an index of approximately 1,000 of the largest companies in the U.S. equity market.