January 04, 2007

PowerShares Three

PowerShares launched three new one-off ETFs onto the AMEX during the third quarter. The new funds include two environmental ETFs, the PowerShares Cleantech Portfolio (AMEX: PZD) and PowerShares Progressive Energy Portfolio (AMEX: PUW) and a third fund called the PowerShares Listed Private Equity Portfolio (AMEX: PSP).

The new Progressive Energy fund invests in technologies that improve the environmental performance of old energy sources like coal, oil and nuclear power, while the Cleantech fund broadens out its environmental focus to include companies working on ways to improve industrial efficiency and cut pollution.

The controversial Private Equity fund, meanwhile, represents the first attempt to open up the private equity space to retail investors. In theory, the fund tracks a modified equal-dollar-weighted index of 34 companies involved in the private equity business. In practice, many of the components have only tangential relations to traditional private equity firms. The index developers almost admit as much, but argue that you should not sacrifice the good on the altar of perfection; at least the fund comes close.

All three funds charge 70 basis points.

Better Than Ever

Index investors spurned by Amy Domini's decision to transition the $1.2 billion-plus Domini 400 Index Fund to an actively managed strategy are having the last laugh. Not only has Green Century Investments lowered the fee on its Domini 400 Index Fund to match the old fund's 95 basis point expense ratio, but now BGI has launched a new ETF that charges just 50 basis points. The new fund trades on the AMEX under the ticker symbol "DSI."

The decision to list on the AMEX is curious, as it comes less than a year after BGI decided to transition all of its ETFs away from the AMEX to the NYSE.

Wisdom Forest

WisdomTree Investments petitioned the SEC for the right to launch 31 new ETFs. Twenty-five of the funds rely on some variant of WisdomTree's classic dividend-weighted methodology, including five domestic sector funds and 20 international ETFs (including the first-ever ETF focused on stocks listed in India.)

In a somewhat shocking twist, the filing also includes six funds that weight stocks based on earnings. WisdomTree previously trumpeted dividends as the most transparent, least corruptible "fundamental" investing metric, and has long argued that high yields are correlated with above-market returns. It is not clear yet how the earnings-focused ETFs fit into that picture.

The earnings funds are all domestic (U.S.) funds. They include broad market, large-cap, mid-cap and small-cap funds that are weighted by earnings, as well as two funds that focus on stocks with low price-to-earnings ratios.

Rydex Takes On ProShares

Rydex Investments has filed for 96—count 'em, 96—leveraged, inverse and inverse-leveraged ETFs. The filing includes full slates of S&P and Russell style indexes, a full complement of S&P Sector SPDR funds and funds linked to the popular Nasdaq-100 Index.

The filing is a direct challenge to ProShares, which currently offers the only leveraged and inverse ETFs on the market, including ETFs tied to some of the same indexes covered by the Rydex filing.

Like ProShares, Rydex plans to offer three ETFs for each index track:

• Dynamic: 200 percent long exposure
• Inverse: 100 percent short exposure
• Dynamic Inverse: 200 percent short exposure

There is no word yet on expense ratios for the funds. ProShares currently charges 95 basis points for its leveraged and inverse ETFs.

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