Around The World Of ETFs

January 01, 2004

In Conjunction With The Exchange -Traded Funds Newsletter (archived content is viewable at

More 'Quasi-Act i ve' Indexes From The Amex

The American Stock Exchange introduced six new "quasi-active" Intellidex Indexes based on U.S. equity style boxes that meet objective screening criteria. The Intellidex Indexes are designed to identify stocks that have capital appreciation potential using a proprietary stock selection and portfolio construction methodology.

Robert Tull, vice president of the Amex ETF Marketplace, said, "We are extremely pleased about the launch and license of the six new Intellidex Indexes. As the global leader in listing ETFs, the Amex continually strives to bring new opportunities to the marketplace for investors."

Scott Ebner, associate director of new product development at the Amex, said, "The launch of the new Intellidex Indexes continues our effort to develop innovative indexes using the Amex's expertise in index calculation to cre- ate indexes for ETFs and other investment products."

The six new indexes include: the Dynamic La rge Cap Growth Intellidex Index (symbol: ILH); the Dynamic Large Cap Value Intellidex Index (symbol: ILW); the Dynamic Mid Cap Growth Intellidex Index (symbol: ILJ); the Dynamic Mid Cap Value Intellidex Index (symbol: ILP); the Dynamic Small Cap Growth Intellidex Index (symbol: ILK); and the Dynamic Small Cap Value Intellidex Index (symbol: ILZ).

PowerShares Capital Management has licensed the indexes as the basis for more exchange-traded funds.

The proprietary Intellidex model employs a quantitative approach to stock selection. On a quarterly basis, eligible companies are ranked based on a variety of criteria including fundamentals, valuation, timeliness and risk factors, and then selected based on their cumulative score. The Intellidex Indexes are calculated using a modified equal-dollar- weighting methodology. The Intellidex methodology selects stocks that meet certain quantitative criteria historically indicative of potential stock growth.

"Applying the Intellidex selection methodology to size and style segments of the market is a natural extension of the Intellidex Dynamic M a r ket and Dynamic OTC indexes launched earlier this year," said Ebner. In May 2003 PowerShares Capital Management introduced ETFs based on the indexes- Po w e r S h a res Dynamic Marke t Portfolio (ticke r: PWC) and Power Shares Dynamic OTC Portfolio (ticke r: PWO)-with expense ratios of 0.60%.

The existing Dynamic Market Intellidex Index starts with an initial universe of the 2,000 largest U.S.- domiciled stocks (by market cap) traded on the NYSE, AMEX and Nasdaq. Only 100 stocks are included in the index, after screening by the proprietary methodology. The index attempts to achieve sector and size weightings similar to the overall broad market-about 70% in large- caps and 30% in mid- and small-caps. The Dynamic OTC Intellidex index (DYO) is similarly constructed and has 100 stocks, although the initial universe is the 1,000 largest U.S-headquartered companies quoted on the Nasdaq National Market. Both indexes are modified equal-dollar-weighted, and are rebalanced quarterly.

The Intellidexes are expected to have significantly more turnover than traditional indexes.

The Amex is currently the home for 123 exchange-traded funds, and helped develop the first U.S. ETF (SPY) tracking the S&P 500 index.

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