By Heather Bell
PowerShares Launches First ETFs Of ETFs
On May 20, PowerShares once again broke new ground in the exchange-traded fund industry with the launch of the first ETFs of ETFs, the PowerShares Autonomic Global Asset Portfolios. The three funds were launched Tuesday on the American Stock Exchange and track indexes of ETFs designed by Boston-based advisory firm New Frontier Advisors [NFA].
The PowerShares Autonomic Growth NFA Global Asset Portfolio (AMEX: PTO), PowerShares Autonomic Balanced Growth NFA Global Asset Portfolio (AMEX: PAO) and PowerShares Autonomic Balanced NFA Global Asset Portfolio (AMEX: PCA) represent three different asset allocation strategies and risk levels, with differing amounts assigned to several different asset classes. The equity allocation encompasses domestic stocks, foreign stocks and real estate, while the fixed-income bucket covers fixed income, commodities and currency.
NFA uses its proprietary "Resampled Efficiency" optimization processes to construct an index of ETFs that will deliver maximum returns for a desired risk level.
PCA's assets are approximately 60% equity and 40% fixed income. PAO is 75% equity and 25% fixed income. PTO, the most growth-oriented of the three new ETFs, is 90% equity and just 10% fixed income. Each ETF has 27 holdings, and not surprisingly, many of those are other PowerShares ETFs. The underlying indexes are rebalanced on a quarterly schedule but can be rebalanced more often if market conditions cause the indexes to deviate from their targeted risk levels. All three funds charge an expense ratio of 0.25% on top of the fees assessed by the underlying ETFs.
WisdomTree Adds Two More Currency ETFs
This week WisdomTree (WSDT.PK) added two more funds to its growing lineup of actively managed currency ETFs. The currency funds are a bit of a departure for the firm, which usually features earnings- or dividend-weighted index ETFs.
The WisdomTree U.S. Current Income Fund (NYSE: USY) is the first actual money market ETF to hit the U.S. market. The fund is currently allocated 43.49% to government bonds and 56.51% to commercial paper. USY has an average yield to maturity of 2.23%. It charges an expense ratio of 0.25%.
The WisdomTree Dreyfus Japanese Yen fund (NYSE: JYF) invests in short-term, investment-grade debt from Japan. It is designed to function essentially as a money market fund offering exposure to the Japanese market. The Japanese fund charges 0.35% in annual expenses.
A Small Slice Of Emerging Markets
State Street Global Advisors rolled out the U.S. market's first capitalization-weighted, small-cap emerging markets exchange-traded fund on May 16. The SPDR S&P Emerging Markets Small Cap ETF (AMEX: EWX) tracks the S&P/Citigroup Emerging Market Small Cap Index.
WisdomTree manages the WisdomTree Emerging Markets SmallCap Dividend Fund (NYSE: DGS), but it is dividend-weighted.
The new SPDR fund's underlying index had roughly 1,660 holdings as of March 31. Taiwan has by far the largest weighting among the 25 countries represented at 31.91%, while China is weighted at 7.83%, India at 6.51%, South Africa at 6.48% and Brazil at 5.97%. EWX charges an expense ratio of 0.65%.
On May 19, Northern Trust launched three ETFs covering Belgium, the Netherlands and China on the NYSE Arca platform:
- NETS Hang Seng China Enterprises Index Fund (NYSE: SNO)
- NETS BEL 20® Index Fund (NYSE: BRU)
- NETS AEX-Index Fund (NYSE: AEX)
SNO’s underlying index covers the "H" shares - which are basically shares in companies based in mainland China that have listed on the Hong Kong Stock Exchange. With China's stock markets largely closed to foreign investment, the H-shares are one of the few ways that foreign investors can gain direct access to China's red-hot economy. SNO charges an expense ratio of 0.51%.
The NETS BEL 20® Index Fund (NYSE: BRU) tracks Belgium's blue-chip index of the 20 largest stocks listed on the Euronext Brussels exchange, while the NETS AEX-Index Fund (NYSE: AEX) covers Amsterdam's top 25 blue-chip stocks. Both carry an expense ratio of 0.47%.