PowerShares Launches Five ETFs

June 13, 2007

PowerShares further expanded its line-up of international exchange-traded funds (ETFs) this week with the launch of five new products on the American Stock Exchange (AMEX).

PowerShares further expanded its line-up of international exchange-traded funds (ETFs) this week with the launch of five new products on the American Stock Exchange (AMEX).  The funds each charge an (eye-popping) 0.75% expense ratio, among the highest expense ratio ever for non-leveraged equity ETFs.

Three of the ETFs track broad-based international indexes designed by consulting firm Quantitative Strategies Group. These quant-focused funds use a variety of factors -- balance sheet strength, capital structure, leverage, earnings growth, earnings quality and price momentum  -- in an attempt to identify stocks that will outperform the market.

The new international ETFs fill a large hole in the PowerShares ETF platform, as they give PowerShares, for the first time, ETFs to compete with popular funds like the iShares EAFE ETF (NYSE: EAFE). Foreign ETFs have been one of the fastest growing segments of the market recently.

Interestingly, PowerShares has taken the step of branding these ETFs as “PowerShares Dynamic” ETFs. That’s the same branding given to the original suite of PowerShares ETFs, as well as all of the ETFs tied to the Intellidex family of indexes from the American Stock Exchange (AMEX), which many consider the core of the PowerShares ETF line-up.

Not surprisingly, the new quantitative funds have performed very well on a backtested basis. The PowerShares Dynamic Developed International Opportunities Portfolio (AMEX: PFA), which tracks a similar market as the MSCI EAFE index, has returned 21.83% on a backtested basis for the 10-year period ending March 31, 2007, beating the EAFE index by 13.63 percentage points.

The other two funds offer a regional focus: the PowerShares Dynamic Asia Pacific Portfolio (AMEX: PUA) includes equities from Australia, New Zealand, Hong Kong and Singapore, while the Power Shares Dynamic Europe Portfolio (AMEX: PEH) tracks stocks in mainline Europe. Both have strong backtested performance.

In addition to these international ETFs, PowerShares also launched two “global” funds linked to environmental and natural resource markets. The PowerShares Global Clean Energy Portfolio (AMEX: PBD) tracks the WilderHill New Energy Global Innovation Index, which includes roughly 40 companies involved in the development and production of cleaner energy.  The PowerShares Global Water Portfolio (AMEX: PIO) tracks the Palisades Global Water Index, a modified, equal-weighted global index of roughly 40 companies involved in water treatment and the provision of technology and services related to water consumption.

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