PowerShares Adds New Dorsey Wright ETF

July 19, 2012

PowerShares rounds out suite of equity ETFs using Dorsey Wright technical screens with a fund focused on U.S. small-cap stocks.

Invesco PowerShares, the money management firm best known for its Nasdaq-100 ETF (NasdaqGM: QQQ) today rolled out another Dorsey Wright-linked fund, this one a small-cap U.S. equities ETF that looks to expand on the success of its large-cap predecessor, the PowerShares DWA Technical Leaders Portfolio (NYSEArca: PDP)

The PowerShares DWA SmallCap Technical Leaders Portfolio (NYSEArca: DWAS) tracks the Dorsey Wright SmallCap Technical Leaders Index and invests in 200 small-cap companies selected from a pool of 2,000 based on Dorsey Wright & Associates’ “relative strength” scoring.

The mix is a modified equally weighted portfolio that costs 0.60 percent a year and is rebalanced quarterly. DWAS follows its large-cap predecessor, the PowerShares DWA Technical Leaders Portfolio (NYSEArca: PDP), which applies the same methodology to the U.S. large-cap space. The large-cap ETF has attracted $560 million since its 2007 inception.

Investors have grown to embrace small-cap strategies as part of their overall equities exposure, and fund providers have been quick to cater to that demand. At least 60 small-cap equity ETFs—including leveraged and inverse strategies—now vie for investor attention.

Small-cap stocks are particularly attractive at certain times of an economic cycle, notably at the beginning of expansions when smaller companies tend to outperform larger ones. DWAS’ relative strength methodology looks to hone in on the ones that stand out relative to their peers.

The new ETF would be PowerShares’ fourth ETF to tap into Dorsey Wright’s expertise. The company also has an emerging markets fund and one focused on developed markets that apply the same methodology.

The PowerShares DWA Developed Markets Technical Leaders Portfolio (NYSEArca: PIZ) has gathered $50 million in assets, while the PowerShares DWA Emerging Markets Technical Leaders Portfolio (NYSEArca: PIE) has $162 million in assets.

Health care is DWAS’ largest sector allocation, representing 22.4 percent of the portfolio, followed by an 18.5 percent allocation to financials and 16 percent to information technology. At launch, eight sectors were represented in the mix, according to information provided by the company on its website.

Top holdings include the likes of Jazz Pharmaceuticals, Pier 1 Imports, Clean Harbors and Dollar Thrifty Automotive.

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