ETF Watch: PowerShares Plans 3 Funds

The proposed ETFs will track indexes from S&P Dow Jones Indices.

ETF.com
|
Reviewed by: etf.com Staff
,
Edited by: etf.com Staff

A recent series of filings from Invesco PowerShares outlines its plans for three smart-beta ETFs that will be based on S&P indexes. Two of the funds target the large-cap segment via indexes derived from the S&P 500, while the third fund invests in the small-cap space.

All three funds are slated to list on the Bats exchange. Bats Global Markets owns ETF.com.

The PowerShares S&P 500 Risk Weighted Portfolio will track an index that covers the same components as the cap-weighted S&P 500 but reweights them inversely by relative volatility, meaning that the least volatile stocks receive the largest weightings, while the most volatile receive the smallest weightings, the prospectus says.

The PowerShares S&P 500 Value With Momentum Portfolio also will track an index derived from the S&P 500. However, instead of just reweighting the components, it screens out all but 100 stocks. First, the index’s methodology scores the component pool based on value using the book-value-to-price ratio, the earnings-to-price ratio and the sales-to-price ratio. It selects the top 200 companies based on the resulting value score.

From there, the methodology ranks the remaining stocks based on their momentum score, which is based on the volatility-adjusted change in a stock’s price over a 12-month period. It selects the top 100 stocks from that pool to arrive at the final component list. Companies are weighted by the average of their value and momentum scores, according to the prospectus.

The PowerShares S&P SmallCap Quality Portfolio will track an index derived from the S&P SmallCap 600 Index. The methodology assigns a quality score to each company in the parent index based on its return on equity, accruals ratio and financial leverage ratio, selecting the top 120 companies, and weights them based on their respective quality scores, the prospectus says.

The filings did not include tickers or expense ratios.

Contact Heather Bell at [email protected].

 

etf.com is the single source for ETF intelligence. We provide real-time ETF news and analysis to educate investors and drive financial knowledge in the space. Our personalized and accurate information, alongside industry-leading financial tools, are depended upon to develop winning investment and financial decisions. At etf.com, we strive to serve both the individual investor as well as the professional financial advisor to educate and grow the ETF community.