Big-name funds are issuing words of caution that the safest trade on Wall Street, betting on low-volatility stocks to protect against market turmoil, is looking increasingly precarious.

Legal & General Investment Management Ltd. and Barclays Investment Solutions are among those warning that billions of dollars flowing into the defensive strategy has made it overcrowded and expensive.

Even as shares with muted swings performed exactly as advertised last quarter -- shedding less than half of the S&P 500 Index’s 14 percent decline -- fears are growing the trade won’t prove a port in the next storm.

“Low volatility might be becoming vulnerable as investors chasing recent performance and buying into gloomy 2018 outlooks flock into it,” said John Roe, head of multi-asset funds at Legal & General with a combined 985 billion pounds ($1.3 trillion) under management. “It is becoming a relatively consensus position, which for us is a warning sign.”

Amundi, Robeco and HSBC Private Bank are among major asset managers that have been recommending the investing style to clients still on tenterhooks over the outcome of U.S.-China trade talks, the path of interest rates and flagging global growth.

Based on quant research suggesting that investors chase volatile names and undervalue stocks that swing less, low-volatility equities can provide a cushion when markets tank, but on the flipside will typically lag rallies.

That makes their appeal during last quarter’s $5 trillion equity meltdown obvious and hints at their attractiveness to money managers playing defense.

‘Unanswered Questions’

“2019 still has a lot of uncertainties, many questions are still unanswered, and in this environment low volatility can still outperform because it’s such a unique situation,” said Bruno Taillardat, global head of smart beta and factor investing at Amundi.

Investors poured $2.5 billion into U.S.-listed ETFs tracking low volatility in January, the most of any factor category. The iShares Edge MSCI Min Vol USA ETF alone added $1 billion, capping nine months of non-stop inflows, as markets fretted a slew of developments in trade, U.S. politics and global growth signposts.

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