Low-volatility ETF cuts exposure to utilities, adds to health care, technology — what it means for investors
One of the top low-volatility ETFs just got a revamp.

The Invesco S&P 500 Low Volatility ETF (SPLV), a portfolio of 100 S&P stocks that have exhibited the lowest levels of volatility over the past 12 months, changed its stripes in its May rebalancing. The fund swapped traditionally low-volatility stocks including Consolidated Edison and McDonald's for names such as Amazon and eBay , a notable shift from its historical focus on value plays.

SPLV's largest sector allocations are now health care at 25.5%, consumer staples at nearly 23% and industrials at about 16%. Tech stocks make up roughly 8.5% of the portfolio. Verizon Communications , Cerner and Clorox are currently the fund's top holdings.

SPLV is down more than 15% year to date while the S&P has fallen 6.5%.

"We're just in a rotation from two defensive sectors to another two defensive sectors," CFRA's Todd Rosenbluth told CNBC's "ETF Edge" on Wednesday, referring to SPLV's move out of utilities and real estate stocks into health care and staples.

"What also caught my eye is this ETF now actually has more exposure to technology stocks," said Rosenbluth, his firm's senior director of ETF and mutual fund research.

At its current weighting, tech accounts for more of SPLV's portfolio than utilities and real estate combined, Rosenbluth said.

"SPLV has always been underweighted towards the growthier sectors like technology, unlike USMV, which is iShares' Minimum Volatility ETF ," he said. "It's now owning what are the most recently low-volatility stocks. So, it's actually doing what you'd want it to do; it's rotating away from what had been previously low vol but then spiked a bit."

Rosenbluth's bottom line? Know what you own.

"These ETFs rebalance. It's important, if you own them, to make sure you look inside and use third-party research to be able to help you validate that," he said. "Don't just buy it and hold it and forget about it, but make sure you understand."

Salvatore Bruno, chief investment officer at IndexIQ, said sector selection plays an important role when it comes to mitigating volatility.

"We've worked with S&P to create an index and an ETF that actually applies a similar concept to the high-yield corporate bond market, which in some ways has parallels to the equity market, but it actually uses forward-looking information like option-adjusted spreads and duration," he said in the same interview, referring to the IQ S&P High Yield Low Volatility Bond ETF (HYLV).

"What we find there is it actually does really well during periods of ... heightened volatility," Bruno said. "Some of it is from security selection, but I think a piece of it is actually coming from the sector selection."

The strategy has been proven out by past crises, Bruno said. In the early 2000s, it went underweight media and telecom stocks during the fallout from the dot-com bubble, and in the 2007-2009 financial crisis, it shed autos and financial plays, he said.

"More recently, it's been underweight things like energy and financials and overweight health care and consumer staples and communication services," he said. "So, it is a little bit more forward-looking, and maybe there are clues that you can take out of the high-yield corporate bond market that maybe you could actually apply to equities. And you can invest directly in the high-yield corporate bonds as a way to potentially dampen the volatility."

SPLV fell slightly in early Friday trading. HYLV rose by less than half of 1%.

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