Eric Falkenstein wrote one of my favorite books on finance, Finding Alpha. In this book, he goes over the typical lifecycle of market inefficiencies. Markets might mis-price volatility or Eurodollars or under estimate stock market daily reversals for an extended time period, but once people find out about it and have the tools to easily trade it the alpha available to investors in the know decreases. In the same book and on his blog he also promotes his pet investment thesis: low volatility stocks or avoiding high volatility stocks. If CAPM is wrong and people are basically envious rather than risk averse then their main goal is to outperform the benchmark. Low volatility stocks offer no hope of outperforming the benchmark and in fact consistently underperform it during bull markets. Because of this they are subsequently undervalued and massively outperform during market turbulence. Their risk adjusted return across stock market cycles is better than the index as a whole by over a percent a year. This doesn't sound like much, but a one percent growth rate differential matters a lot over the long run.
Recently, Falkenblog has been pointing out all of the people coming around to this point of view. As someone who wants to take advantage of this strategy in scale this is worrisome (Even if the prospect of being able to choose to apply this strategy via ETFs is also convenient). It is starting to look like the strategy is going to get crowded. The low volatility strategy probably isn't crowded right now, but it looks like that this cycle might be the time that it finally becomes popular enough to impact returns. If that's true, than that means that this cycle will see low volatility stocks underperform to a much lower extent but also fail to outperform to the same extent during the next bear market.
It will be interesting to see how many low vol ETFs are introduced and their subsequent popularity. Measuring the AUM of low vol ETFs and funds is a good way to track just how popular the idea is getting because mentions in press and conferences will only matter insofar as they are reflected by the choices investors are making in their portfolios.