Invesco PowerShares introduced a new suite of exchange traded funds on Thursday, including an overhaul of existing funds, that will allow investors to trade in what the company calls the first "fundamental pure style ETFs." They are based on the Research Affiliates Fundamental Index, or RAFI, methodology.
PowerShares renamed the indexes and tickers of seven existing ETFs in its Intellidex series to the RAFI Fundamental U.S. Series. The nine funds will each have an expense ratio of 0.39%.
The RAFI Index Series holds 2,500 of the largest U.S. listed companies. PowerShares bases its "fundamental" methodology on available book value, cash flow averaged over the last five years, sales averaged over the last five years and total dividends distributed over the last five years. It is the company's belief that assigning weights based on a stock's financial size will help reduce price distortion and offer a greater objective representation of the market. Each company is also classified into their asset class categories.
"We continuously review and analyze ways to improve our overall product lineup," commented Ben Fulton, Invesco PowerShares managing director of global ETFs, at a recent press release. "We believe the change to the RAFI Index Series and lower fees will provide investors with the potential for improved risk-adjusted returns, and will position our innovative family of ETFs for the future."
"PowerShares Fundamental Pure Portfolios incorporate the RAFI Fundamental Index investment criteria of cash flow, book value, sales and dividends to determine a stock's weight," said John Feyerer, head of product strategy & research at Invesco PowerShares. "We believe this methodology has shown the potential to produce improved risk-adjusted returns compared to cap-weighted benchmarks."
The new suite of nine PowerShares Fundamental Pure Style ETFs include:
- Fundamental Pure Large Value Portfolio (PXLV). Sector allocations include: Consumer Discretionary 7.19%, Consumer Staples 9.93%, Energy 20.11%, FInancials 25.04%, Health Care 7.44%, Industrials 10.50%, Info Tech 2.39%. Materials 1.99%, Telecom Services 4.57% and Utilities 10.83%.
- Fundamental Pure Large Core Portfolio (PXLC). Sector allocations include: Consumer Discretionary 7.52%, Consumer Staples 15.04%, Energy 7.08%, Financials 6.56%, Health Care 21.46%, Industrials 20.50%, Info Tech 15.15%, Materials 3.28% and Telecom Services 3.41%.
- Fundamental Pure Large Growth Portfolio (PXLG). Sector allocations include: Consumer Discretionary 8.86%, Consumer Staples 18.44%, Energy 12.56%, Financials 13.67%, Health Care 9.10%, Industrials 4.45%, Info Tech 27.65%, Materials 4.49% and Telecom Services 0.77%.
- Fundamental Pure Mid Value Portfolio (PXMV). Sector allocations include: Consumer Discretionary 23.73%, Consumer Staples 3.47%, Energy 2.70%, Financials 16.00%, Health Care 8.13%, Industrials 12.62%, Info Tech 11.90%, Materials 8.20%, Telecom Services 0.23% and Utilities 13.03%.
- Fundamental Pure Mid Core Portfolio (PXMC). Sector allocations include: Consumer Discretionary 17.65%, Consumer Staples 5.30%, Energy 5.78%, Financials 19.53%, Health Care 13.12%, Industrials 20.79%, Info Tech 10.11%, Materials 6.19% and Utilities 1.54%.
- Fundamental Pure Mid Growth Portfolio (PXMG). Sector allocations include: Consumer Discretionary 13.07%, Consumer Staples 4.14%, FInancials 11.20%, Health Care 24.77%, Industrials 22.69%, Info Tech 12.26%, Materials 3.28% and Telecom Service 1.55%.
- Fundamental Pure Small Value Portfolio (PXSV). Sector allocations include: Consumer Discretionary 21.09%, Consumer Staples 3.67%, Energy 6.53%, Financials 25.00%, Health Care 6.21%, INdustriasl 16.65%, Info Tech 9.51%, Materials 5.23%, Telecom Services 1.22% and Utilities 4.88%.
- Fundamental Pure Small Core Portfolio (PXSC). Sector allocations include: Consumer Discretionary 11.64%, Consumer Staples 5.52%, Energy 4.34%, Financiasl 18.18%, Health Care 16.40%, ndustrials 17.34%, Info Tech 12.54%, Materials 9.82%, Telecom Services 0.47% and Utilities 3.74%.
- Fundamental Pure Small Growth Portfolio (PXSG). Sector allocations include: Consumer Discretionary 16.22%, Consumer Staples 2.19%, Energy 6.27%, Financials 12.07%, Health Care 17.18%, Industrials 13.84%, Info Tech 24.50%, Materials 5.57%, Telecom Services 1.53% and Utilities 0.63%.
Max Chen contributed to this article.