PowerShares Planning Beta, Momentum, Volatility ETFs

by on October 27, 2010 | ETFs Mentioned:

After announcing earlier this month that it plans to shutter ten ETFs by the end of the year, PowerShares continues to push ahead with plans for additional innovations in the ETF space. The Wheaton, Illinois-based firm recently filed details with the SEC for a line of ETFs linked to S&P indexes built around various investment strategies, including beta, momentum, and volatility. The filing detailed plans for the following ETFs:

  • S&P 500 High Beta Portfolio: Linked to an index consisting of the 250 stocks from the S&P 500 Index with the highest beta over the past 12 months.
  • S&P 500 Low Beta Portfolio: Linked to an index consisting of the 250 stocks from the S&P 500 Index with the lowest beta over the past 12 months.
  • S&P 500 High Momentum Portfolio: Linked to an index consisting of the 100 stocks from the S&P 500 with the highest percentage price appreciation over the last 12 months.
  • S&P 500 High Volatility Portfolio: Linked to an index made up of the 250 S&P stocks with the highest realized volatility over the past 12 months.
  • S&P 500 Low Volatility Portfolio: Linked to an index made up of the 250 S&P stocks with the lowest realized volatility over the past 12 months.

Currently, there aren’t any ETFs available to U.S. investors that seek to replicate the indexes underlying the proposed PowerShares funds, though there are some similar options. PowerShares already offers the DWA Technical Leaders Portfolio (PDP), which is linked to an index consisting of stocks that demonstrate high relative strength scores. Guggenheim offers a Defensive Equity ETF (DEF) that consists of companies that reflect occurrences such as low relative valuations, conservative accounting, dividend payments and a history of out-performance during bearish market periods. DEF’s beta comes in at just 0.80, making it an attractive option for investors looking to establish exposure to low beta equities [see Smoothing Volatility Through ETFs].

The proposed PowerShares ETFs could find the stiffest competition from an issuer yet to launch an ETF. Russell, best known as the index provider behind some of the most popular ETFs, has laid the groundwork for an entrance in the ETF space that would include both “plain vanilla” equity funds and more strategic quant-based ETFs [see Russell Planning Major ETF Push]. Among the funds for which Russell has sought SEC approval are the Russell 1000 Low Beta ETF (LBTA), Russell 1000 High Beta ETF (HBTA), Russell 1000 Low Volatility ETF (LVOL), Russell 1000 High Volatility ETF (HVOL), and Russell 1000 High Momentum ETF (HMTM) [also see our Guide To Volatility ETFs: Volatility ETN Investing]

No details on ticker symbols or expense ratios were included in the filing.

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Disclosure: No positions at time of writing.