PowerShares Launches Strategy, International Real Estate Funds

Last week, PowerShares added to its lineup of strategy and fundamental ETFs with the rollout of two more funds based on the Dorsey, Wright & Associates Technical Leaders indexes and an international real estate ETF tracking a FTSE RAFI index.

The PowerShares DWA Developed Markets Technical Leaders Portfolio (PIZ) and PowerShares DWA Emerging Markets Technical Leaders Portfolio (PIE) take the DWA Technical Leaders strategy international. In 2007, PowerShares launched the PowerShares DWA Technical Leaders Portfolio (PDP) covering domestic stocks. The DWA Technical Leaders strategy uses a proprietary methodology to select stocks with the best relative strength characteristics.

PIZ tracks the stocks of developed markets excluding the United States. Its top five countries are Germany (22.34%), Canada (17.04%), Spain (8.45%), Austria (7.61%) and France (7.04%). Its largest sector is Materials, at 28.29%, followed by Industrials at 22.86% and Financials at just 15.09%. Meanwhile, the Technology sector represents just 0.50% of the ETF's market capitalization. Its holdings have an average market capitalization of $25.9 billion.

PIE covers emerging markets; nearly one-third of the fund is in China (30.22%), followed by 14.87% in Korea, 12.20% in Malaysia, 11.03% in Peru and 9.91% in Turkey. It has the same top three sectors as PIZ, but at different weightings: Industrials represents 29.22%; Materials, 26.33%; and Financials, 14.61%. The average market cap is fairly sizable at $21.3 billion, not much less than that of PIZ.

The indexes underlying each of PowerShares' DWA Technical Leaders ETFs include 100 stocks. And while PDP charges just 0.60%, PIZ charges 0.80%. PIE is the most expensive of the three funds at 0.90%.

The third fund to launch last week was the PowerShares FTSE RAFI International Real Estate Portfolio (PRY). International real estate had been receiving a lot of attention lately, and PRY is not the first fundamentally weighted ETF to cover the area - WisdomTree launched its own such fund several months ago, the WisdomTree International Real Estate Fund (DRW). DRW is cheaper than PRY, charging just 0.58% versus PRY's 0.75%.

The funds hold the same top three components - Westfield Group, Sun Hung Kai Properties Ltd. and Cheung Kong Holdings Ltd. - and have five of their top 10 components in common. However, their country allocations are somewhat different. Australia represents nearly one-third of DRW's total portfolio at 31.96%, followed by Hong Kong at 29.38%, Japan at 10.27%, Singapore at 7.03% and the United Kingdom at 5.40%. Meanwhile, PRY's top five countries are Hong Kong at 24.08%, Japan at 17.30%, Australia at 14.11% (less than half of its weighting in DRW), the United Kingdom at 6.93% and France at 6.88%.

Both funds are a bit new for a performance comparison, so choosing between them could be a matter of expenses and whether you believe more in the multiple factors used in the weighting of the FTSE RAFI indexes or the simpler dividend-weighting methodology of WisdomTree.

PowerShares is fairly late to the game with PRY, given that it has been on the cutting edge of most other trends in the ETF industry (who could forget the great muni bond ETF race of 2007?). Most interestingly, despite its wide array of sector funds, this is the first real-estate-focused ETF for the firm. However, there is a good chance that fans of the FTSE RAFI indexes have been holding off investing in international real estate as they waited for this fund.

	PowerShares FTSE RAFI Int. RE	WisdomTree International RE
Ticker	PRY	DRW
Exp. Ratio	0.75%	0.58%
P/E Ratio	18.45	8.69*
P/B Ratio	1.54	1.46*
Largest Country	Hong Kong, 24.08%	Australia, 31.96%
Top 5 Holdings
1	Sun Hung Kai Properties, 5.69%	Westfield Group, 9.76%
2	Westfield Group, 4.59%	Sun Hung Kai Properties, 8.14%
3	Cheung Kong Holdings, 3.49%	Cheung Kong Holdings, 5.47%
4	Mitsui Fudosan, 3.37%	Henderson Land Development,3.30%
5	Mitsubishi Estate, 2.80%	Stockland, 2.94%

• Read the prospectus for PIE and PIZ here.
• Read the prospectus for PRY here.

Written by Heather Bell

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