(Harvest) Low volatility (a.k.a. flavor of the month) has recently fallen out of vogue. Over time, financial markets always see massive fund flows that cause bubbles to form and eventually burst, more recently in tech stocks, real estate, commodities and emerging markets.
We’ve also seen smaller bubbles in sectors?such as treasuries, healthcare and biotech, financials,and most recently, low volatility funds. Investors have a tendency to chase performance. When the next flavor of the month comes along, everyone piles into it until that idea is no longer the “cool” product to own, and it falls out of favor – this is what we’ve recently witnessed with low vol funds.
