PowerShares Expands S&P 500 ETF Range

Invesco PowerShares has launched the first exchange traded fund (ETF) in Europe to track the S&P 500 VEQTOR Index, which aims to provide long-only access to U.S. equities while minimising volatility.

The PowerShares S&P 500 VEQTOR UCITS ETF (SPVG) has ongoing fees of 0.39 percent and is physically replicated. It is designed to track the U.S. market while minimising volatility by replicating the S&P VIX Short-Term Futures Index, which tends to act inversely to the equity market, according to a note from the provider.

If the index loses more than 2 percent in five business days, the ETF will employ a “stop loss” mechanism, where the entire allocation moves to cash or cash equivalents until losses are reduced. Depending on how volatile the market is, up to 40 percent of the fund can be invested in VIX futures.

Past returns show that the underlying index generated 6.6 percent over five years and 5.1 percent over three years, slipping short of the S&P 500’s 15.8 percent and 18.9 percent respectively.

Bryon Lake, Head of Invesco PowerShares, EMEA, said today in a statement: “Investors are looking for intuitive solutions which allow them to refine their exposure in key markets, like U.S. equities. The challenge is to both generate returns while at the same time reduce downside risk.”

In May the provider launched a High Dividend Low Vol fund that offers investors exposure to the least volatile stocks that generate the highest income from the S&P 500 for 0.30 percent annual fees.