Low volatility funds are designed to provide returns that are roughly in line with the broader equity markets, but also offer lower volatility, and much stronger downside protection. While there isn’t sufficient history for a lot of these funds, the early results are certainly encouraging. For example, according to Morningstar, for the past three years, XMI has shown a down capture ratio of 21%, meaning it experienced only a fraction of the downside of the broader market. This has resulted in a level of return that is much stronger than what has been experienced with the more traditionally constructed BMO MSCI EAFE Index (TSX: ZDM). One problem I have noted with other low vol funds is the level of valuation is significantly higher than comparable cap weighted ETFs. In the international equity space, that is not the case, with valuation levels of XMI, higher, but not significantly so when compared with ZDM. Things look even more attractive when forward looking growth rates are considered, making this my top international equity pick at the moment, even with the higher MER.