PT - JOURNAL ARTICLE AU - Khalid (Kal) Ghayur AU - Ronan Heaney AU - Stephen Platt TI - Low-Volatility Investing: Balancing Total<br/>Risk and Active Risk Considerations AID - 10.3905/jpm.2013.40.1.049 DP - 2013 Oct 31 TA - The Journal of Portfolio Management PG - 49--60 VI - 40 IP - 1 4099 - https://pm-research.com/content/40/1/49.short 4100 - https://pm-research.com/content/40/1/49.full AB - 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