Investors are exiting exchange-traded funds (ETFs) with low-volatility stocks amid concern over higher interest rates.

The funds hold many blue-chip stocks that pay dividends, The Wall Street Journal reported. And dividend stocks don't perform well in rising-rate environments.

The low-volatility ETFs began suffering in May, when Federal Reserve Chairman Ben Bernanke said the Fed might taper its quantitative easing soon and rates began increasing.

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The sector's largest ETF, PowerShares S&P 500 Low Volatility ETF, has lost $822 million of its $4.3 billion in assets since May 22, according to IndexUniverse data cited by The Journal.

"These were popular up until about May, until the Fed says, 'You know what? We're thinking about tapering,'" Christopher Wright, manager of the investment products group at brokerage Hilliard Lyons, told The Journal.

Cabot Money Management owned the PowerShares ETF as part of its aggressive portfolio until it felt more confident about riskier investments, portfolio manager Craig Goryl, told The Journal.

It dumped the ETF in June and has been purchasing assets such as biotechnology stocks. "It was a chicken way to participate in the rising market," Goryl said. "Now we know where we want to be."

In any case, the entire market has exhibited low volatility this year by some measures. The S&P 500 Index rose 1.9 percent as of Sept. 25 when adjusted for price swings, the biggest gain among 24 of the biggest developed nations, according to the Bloomberg Riskless Return Ranking.

"The U.S. continues to be the most resilient economy across the world, and its markets have reflected that with the least amount of volatility," Joseph Tanious, global market strategist for J.P. Morgan Asset Management, told Bloomberg.

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