ETF Watch: PowerShares Plans Multi-Asset Funds

PowerShares has filed for four actively managed ETFs-of-ETFs that will target different levels of risk. That mainly means more conservative funds will have a larger allocation to fixed income and domestic securities, while the more risk-oriented funds will allocate more to equity and international holdings.

All four funds are set to launch on the Bats exchange. Bats Global Markets owns ETF.com.

The ETFs will be able to invest in other PowerShares ETFs but will use funds issued by unaffiliated firms when necessary, the prospectus said. The ETFs, ranging from least risk to greatest risk, are as follows:

The PowerShares Conservative Multi-Asset Allocation Portfolio will invest primarily in fixed-income ETFs (50% to 80%), but will also allocate 20% to 50% of its portfolio to equity and 5% to 10% to ETFs targeting foreign securities (including both fixed income and equity), according to the prospectus.

The PowerShares Moderately Conservative Multi-Asset Allocation Portfolio follows allocation guidelines that are very similar, except it can invest up to 15% of its portfolio in foreign securities.

The PowerShares Balanced Multi-Asset Allocation Portfolio shifts more definitively toward equity, allocating 50% to 70% of its portfolio to that asset class and 20% to 50% to fixed income. Foreign securities will comprise 10% to 25% of the portfolio.

The PowerShares Growth Multi-Asset Allocation Portfolio targets an equity allocation of 60% to 80% and a fixed-income allocation of 20% to 40%. Foreign securities are designated at 20% to 30% of the portfolio.

All four funds target specific factors within their different asset classes and use both qualitative and quantitative criteria in their selection processes, according to the prospectus. The funds establish targets in individual ETF weightings based on the subadvisor’s assessment of the active risk represented by the component ETFs, and each fund is continually monitored by the subadvisor with regard to its performance and risk exposures. All four of the proposed ETFs will hold 10 to 20 other ETFs.

The filing did not include tickers or expense ratios.

Contact Heather Bell at [email protected].