ETF Report UK: How has the NASDAQ Global Buyback Achievers Index performed?
Bryon Lake: The index currently has 193 constituents. For the period from 30 September 2011 till 30 September 2014, the net total return index has returned 77.67% on a cumulative basis (an equivalent 21.10% annualised) – source Bloomberg.” The NASDAQ Global Buyback Achievers Index returns represent simulated performance for the period 30 January 2009 to 8 August 2014 and actual performance for the period from 11 August 2014, based on rules used in the creation of the index, and are not a guarantee of future performance and are not indicative of any specific investment.
ETF Report UK: Let’s talk about the index’s regional or country allocation.
Bryon Lake: At 30 September 2014, the index’s regional exposure was broken down as follows: 59.69% USA, 11.77% Japan, 7.57% Canada, 6.32% Mexico, France 4.60%. Countries with a weight under 4% include Australia, the Netherlands and Great Britian, among other developed and emerging markets.
ETF Report UK: Which sectors are represented in the index?
Bryon Lake: The portfolio follows the index’s semiannual evaluation and quarterly rebalance. The index reconstitutes on a quarterly basis, but the top 10 holdings as at 30 September 2014, included blue chip names like Home Depot, Oracle, Pfizer, Airbus, America Movil and Nippon Telegraph & Telephone. The index currently tilts towards consumer discretionary stocks, which have the largest sector allocation—at 26% of the index—but has significant weight in technology, telecom, financials and industrials.
It tilts towards large caps—they represent 73% of the index—and it’s roughly balanced between growth and value exposures.
The overarching feature that ties all these companies together is the focus on shareholder wealth.
ETF Report UK: One last question: If I’m an adviser, where does this fund fit into my portfolio, and how do I talk to clients about it?
Bryon Lake: The new PowerShares Global Buyback Achievers UCITS ETF can fit in multiple ways in a portfolio: used as a core holding to replace or supplement existing positions, or as a satellite position designed to add the opportunity for potential outperformance to a portfolio.
According to S&P DJ Indices for the 12 months ending June 2014, S&P 500 issuers increased their buyback expenditures by 26.6% to $533.0 billion from the $420.9 billion posted during the corresponding 12 month period in 2013 (Source: SPDJI, 23 September 2014). The level of share buybacks during the trailing 12 month period has only been exceeded once, when, during the 2007 fiscal year, a total of $589.1 billion shares were bought back by S&P 500 members. With research indicating that buyback programs are a growing global phenomenon (Source: Deutsche Bank, “Share Buybacks: Is It Worth It?” - March 2014), numerous firms are now acquiring their own stock at a faster pace than ever; as an example, Japanese businesses have acquired $25 billion of purchases so far this year (Source: Bloomberg, 23 July 2014.)