TY - JOUR T1 - Low-Volatility Investing: Balancing Total<br/>Risk and Active Risk Considerations JF - The Journal of Portfolio Management SP - 49 LP - 60 DO - 10.3905/jpm.2013.40.1.049 VL - 40 IS - 1 AU - Khalid (Kal) Ghayur AU - Ronan Heaney AU - Stephen Platt Y1 - 2013/10/31 UR - https://pm-research.com/content/40/1/49.abstract N2 - Low-volatility strategies have been shown to offer significant total risk and drawdown reduction without sacrificing returns, compared to the market. However, low-risk strategies also involve an inherent trade-off between total risk and active risk (or tracking error). Existing passive alternatives for capturing low-risk strategies emphasize total risk reduction at the expense of high and uncontrolled active risk. The article discusses a new approach for capturing abnormal risk-related payoffs at targeted active-risk levels, using a transparent, rules-based approach. This proposed approach lets investors strike a better trade-off between total risk and active risk, and implement low-volatility investing within the constraints of their active-risk budgets.TOPICS: Portfolio theory, volatility measures, passive strategies ER -