Daily ETF Watch: Rotation Funds Planned

PowerShares files for two more fund-of-funds ETFs using rotation strategies.

Invesco PowerShares has filed for two ETFs that will invest primarily in other PowerShares ETFs as part of a rotation strategy. The PowerShares DWA Tactical International Rotation Portfolio and the PowerShares DWA Momentum & Low Volatility Rotation Portfolio are both slated to list on the Nasdaq stock exchange.

The international fund’s index, the Dorsey Wright International Rotation Index, ranks its universe of ETFs based on relative strength and selects the top five funds. Components are re-evaluated on a monthly basis to assess if they should be replaced or their weightings adjusted.

However, the index can shift entirely into cash holdings if there are not five funds displaying enough relative strength. As the cash component replaces a fund, it receives the weighting previously held by that fund, the prospectus said.

The momentum and low-volatility fund follows a similar relative-strength methodology, except it invests in eight other PowerShares ETFs—four U.S. funds and four international funds implementing momentum and low-volatility strategies. The index compares their relative strength and allocates a weighting of 70% to the funds representing the markets—international or U.S. – with the strongest relative strength and a weighting of 30% to the other four funds.

The underlying index can shift into cash when the component funds are not exhibiting appropriate levels of relative strength compared to cash, according to the prospectus.

The eight funds in the selection universe include the following:

• PowerShares DWA Momentum Portfolio (PDP | B-72)
• PowerShares DWA SmallCap Momentum Portfolio (DWAS | B-59)
• PowerShares S&P 500 Low Volatility Portfolio (SPLV | A-58)
• PowerShares S&P SmallCap Low Volatility Portfolio (XSLV | A-45)
• PowerShares S&P Developed Low Volatility Portfolio (IDLV | C-58)
• PowerShares S&P Emerging Markets Low Volatility Portfolio (EELV | C-61)
• PowerShares DWA Developed Markets Momentum Portfolio (PIZ | C-51)
• PowerShares DWA Emerging Markets Momentum Portfolio (PIE | C-46)

12 First Trust AlphaDex Funds Switch Exchanges

First Trust has moved more of its AlphaDex funds from the NYSE Arca to the Nasdaq stock exchange as of today. The funds delisted from the NYSE Arca are also adopting new indexes that are substantially the same as their previous benchmarks, except now they are calculated by Nasdaq and carry the Nasdaq brand. The AlphaDex methodology and brand is owned and trademarked by First Trust.

The affected funds represent a full suite of domestic ETFs covering core U.S. asset classes. They include the following:

• First Trust Large Cap Core AlphaDex Fund (FEX | B-79)
• First Trust Large Cap Growth AlphaDex Fund (FTC | B-78)
• First Trust Large Cap Value AlphaDex Fund (FTA | B-68)
• First Trust Mid Cap Core AlphaDex Fund (FNX | B-80)
• First Trust Mid Cap Growth AlphaDex Fund (FNY | B-76)
• First Trust Mid Cap Value AlphaDex Fund (FNK | C-63)
• First Trust Small Cap Core AlphaDex Fund (FYX | B-88)
• First Trust Small Cap Growth AlphaDex Fund (FYC | B-72)
• First Trust Small Cap Value AlphaDex Fund (FYT | C-57)
• First Trust Multi Cap Growth AlphaDex Fund (FAD | C-78)
• First Trust Multi Cap Value AlphaDex Fund (FAB | B-65)
• First Trust Mega Cap AlphaDex Fund (FMK | C-84)

Contact Heather Bell at [email protected].