While other sponsors are busy tending to a growth in fixed income ETFs, PowerShares is carving out a niche of its own in small cap funds. The issuer launched nine funds on Wednesday.
The funds and their respective ticker symbols are as follows:
PowerShares will govern the new ETFs with strict inclusion guidelines. To be listed in the new funds, stocks must have a market cap of $250 million to $1.2 billion, have four consecutive quarters of positive earnings, afford enough annual liquidity greater than its market cap, and have at least 50% of its shares owned by the public, according to a press release.
The new funds follow in the popularity of sector based ETFs by offering the chance to investors to buy into strictly small-cap stocks within a certain industry. Each of the nine funds will trade with a .29% annual expense.
There are many ways to skin the exchange-traded fund cat beyond simply short and long positions. In fact, one popular exchange-traded fund generated extra returns to investors by lending their shares last year.
Even with an annual fee, State Street beat its benchmark by .26% last year on its popular Financial Select Sector SPDR Fund (XLF: Quote, Profile, Advanced Chart, News), all while holding positions that mirrored its underlying index. During the height of the short selling spree, the fund generated a total of $21 million in stock-lending fees, mostly from Citigroup stock, in which investors were willing to pay as much as 120% annually to short, the Wall Street Journal reports.
The fund passed on a total of $17.8 million to investors and collected just $13.8 million in annual expenses, essentially paying investors to hold onto their ETF positions. While the results are atypical, the process of stock-lending and the potential profits should weigh on investors’ minds in volatile market climates.
Rather than create leveraged ETFs, banks are finding it easier to create structured products that leverage investments on the investor’s end, instead of leveraging on the ETF’s end. The new products, which stand to benefit from poor publicity surrounding leveraged ETFs, are more like exchange-traded notes than ETFs.
The notes will start with a pricing date this September and end September 2011, with a maximum upside potential of 48.5% and downside of 15%. The notes are double leveraged, and at the end of the two-year maturity date, investors will receive two times the returns of the three underlying ETFs. This system could be wildly popular with investors, as it easily corrects the tracking errors present in daily and monthly compounding, giving investors a long term option.
First Trust may be on the cusp of making 2009 ETF history. Its newest fund, which will track the NASDAQ ABA Community Bank Index, is set to launch on July 1 and could be the best exchange-traded IPO of the year.
Already, analysts are expecting the new fund to grow into one of the largest exchange-traded funds on Wall Street. Helped in part by a dark cloud hanging over the banking sector, the First Trust NASDAQ ABA Community Bank Index Fund (QABA) is set to steal market share from broader based funds, such as the Financial Select Sector SPDR (XLF: Quote, Profile, Advanced Chart, News) and SPDR KBW Bank Fund (KBE: Quote, Profile, Advanced Chart, News).
The fund is rather selective in its criteria, choosing only 102 banking stocks out of the 482 community banks listed on the NASDAQ, Financial Planning reports. Investors expect the fund will be less volatile than others, as it will select banks that are more likely to be on the corner of a subdivision rather than in a skyscraper in Manhattan. Investors believe community banks are more likely to be in tune with local economics and make better, more manageable investments than their larger counterparts.
Leveraged ETFs are found in virtually every sector of the US economy, ranging from double and triple leverage to short and long perspectives. While finding a leveraged ETF may be simple, using them correctly has been not as easy for the investing public.
Direxon Shares, the leader of leveraged ETFs, now has more than $5 billion in assets under management after launching its first triple-leveraged fund just seven months ago, ETFGuide reports. Finding the right leveraged ETF often requires knowing your time horizon. For intra-week strategies, leveraged ETFs are a perfect fit, mixing leverage with a product meant to track only the daily returns of the underlying index.
Over the long term, it might be wiser to invest in an unleveraged ETF. In one example, the Financial Select Sector SPDR (XLF: Quote, Profile, Advanced Chart, News) rallied nearly 100% from its lows in March while its triple leveraged counterpart, Ultra Financials ProShares (UYG: Quote, Profile, Advanced Chart, News), experienced nearly the same growth, despite carrying three times the risk.
While other sponsors are busy tending to a growth in fixed income ETFs, PowerShares is carving out a niche of its own in small cap funds. The issuer launched nine funds on Wednesday.
There are many ways to skin the exchange-traded fund cat beyond simply short and long positions. In fact, one popular exchange-traded fund generated extra returns to investors by lending their shares last year.
Rather than create leveraged ETFs, banks are finding it easier to create structured products that leverage investments on the investor’s end, instead of leveraging on the ETF’s end. The new products, which stand to benefit from poor publicity surrounding leveraged ETFs, are more like exchange-traded notes than ETFs.
First Trust may be on the cusp of making 2009 ETF history. Its newest fund, which will track the NASDAQ ABA Community Bank Index, is set to launch on July 1 and could be the best exchange-traded IPO of the year.
Leveraged ETFs are found in virtually every sector of the US economy, ranging from double and triple leverage to short and long perspectives. While finding a leveraged ETF may be simple, using them correctly has been not as easy for the investing public.
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