PowerShares, Dorsey Wright In Small-Cap Team-Up

June 09, 2010

Invesco PowerShares teams up with Dorsey Wright, hoping its new line of small-cap ETFs will be a more permanent fixture in investors’ portfolios, by serving up a tangible sector-rotation game plan.

Invesco PowerShares, the money management firm best known for its Nasdaq-100 ETF (NYSEArca: QQQQ), is teaming up with Dorsey Wright to market the line of nine PowerShares small-cap sector exchange-traded funds the Wheaton, Ill.-based company brought to market in April. Terms weren’t disclosed.

By using Dorsey Wright’s expertise in technical analysis and relative strength, PowerShares hopes that its new ETFs become more of an ongoing part of investors’ allocation tactics and strategies, according to Ben Fulton, managing director and head of Global ETFs at Invesco PowerShares.

Where investors have in the past largely added small-cap holdings at specific times of an economic cycle—notably at the beginning of expansions when smaller-cap stocks tend to outperform larger-cap equities—they’ll now be able to use Dorsey Wright’s research to help them make timely sector-rotation decisions, potentially making small-cap holdings a core part of investment portfolios.

“Having access to Dorsey Wright research will make it easier for advisers to provide clients with sector-rotation strategies that haven’t existed before for small-caps,”
Fulton said in a telephone interview.

The PowerShares lineup of small-cap sector funds, an ETF-industry first, includes:

  • The PowerShares S&P SmallCap Health Care Portfolio (NasdaqGM: XLVS)
  • The PowerShares S&P SmallCap Energy Portfolio (NasdaqGM: XLES)
  • The PowerShares S&P SmallCap Utilities Portfolio (NasdaqGM: XLUS)
  • The PowerShares S&P SmallCap Industrials Portfolio (NasdaqGM: XLIS)
  • The PowerShares S&P SmallCap Materials Portfolio (NasdaqGM: XLBS)
  • The PowerShares S&P SmallCap Consumer Discretionary Portfolio (NasdaqGM: XLYS)
  • The PowerShares S&P SmallCap Consumer Staples Portfolio (NasdaqGM: XLPS)
  • The PowerShares S&P SmallCap Information Technology Portfolio (NasdaqGM: XLKS)
  • The PowerShares S&P SmallCap Financials Portfolio (NasdaqGM: XLFS)

 

Each sector-specific benchmark is a subset of the S&P SmallCap 600 Index, which is a float-adjusted, market-capitalization-weighted index reflecting the
U.S.
small-cap market. Companies included in the benchmark have at least half their holdings in the hands of public investors. The indexes are rebalanced quarterly, and constituents are replaced on an “as-needed” basis.

PowerShares charges investors 0.29 percent a year in management fees for each of the funds.

The alliance between the two companies builds on a relationship between Invesco PowerShares and Dorsey Wright that centers on indexes Dorsey has created for three existing ETFs. The funds are: The PowerShares DWA Emerging Markets Technical Leaders Portfolio (NYSEArca: PIE); the PowerShares DWA Developed Markets Technical Leaders Portfolio (NYSEArca: PIZ); and the PowerShares DWA Technical Leaders Portfolio (NYSEArca: PDP).

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