PowerShares is going through a significant expansion of its strategy-oriented exchange-traded funds [ETFs]. Today, the firm launched the first of three ETFs based on the Chicago Board Options Exchange's BuyWrite indexes for the S&P 500, the NASDAQ-100 and the Dow Jones Industrial Average, and just a few days ago it announced its intention to launch another three ETFs, two of which are based on Technical Leaders indexes from Dorsey, Wright & Associates.
The PowerShares S&P BuyWrite Portfolio is based on the CBOE S&P 500 BuyWrite Index, which tracks the performance of a covered call strategy as applied to the S&P 500 Index. The strategy tends to outperform in down markets, but sacrifices some upside performance when the market is rising. It is often used to reduce volatility in a portfolio.
The new ETF trades under the symbol "PBP" on the NYSE Arca exchange and is the first ETF available to investors using the BuyWrite strategy. The PowerShares DJIA BuyWrite Portfolio (PGB) and the PowerShares Nasdaq-100 (PQBW) will likely launch soon as well; the ETF provider had originally announced that all three were expected to launch today.
At the end of last week, PowerShares also announced the impending launch of three additional funds, two of which will be based on indexes from Dorsey, Wright & Associates. It already launched the PowerShares DWA Technical Leaders Portfolio (NASDAQ:PDP) earlier this year. The fund tracks an index of 100 U.S.-listed stocks selected via a proprietary methodology based on relative strength analysis. PDP has been performing well, with its underlying index up 11.30% since inception versus 9.93% for the S&P 500. It has a 10-year annual return of 14.66% versus 6.57% for the S&P 500.
The PowerShares DWA Developed Market Technical Leaders (NASDAQ:PIZ) and PowerShares DWA Emerging Market Technical Leaders (NASDAQ:PIE) are based on indexes that have similar methodologies to PDP's underlying index, but instead of U.S.-listed companies they cover stocks from developed and emerging markets.
The third fund announced is the PowerShares FTSE RAFI International Real Estate Portfolio (PRY). The underlying index tracks real estate companies from developed markets excluding the United States. International real estate is of great interest to U.S. investors right now as a diversification vehicle.
The three funds are expected to launch on or around December 28, although the exchange where they will be listed has not been announced.
Written by Heather Bell