PowerShares HighYield Dividend Achievers (PEY)

All Comments on PEY

  • commenter
    Miles Weiss
    Dec 14 02:39 PM
    Interview: Luciano Siracusano, Director of Research for ETF Firm WisdomTree Asset Management [view article]
    Luciano,
    I am impressed by the way all the WisdomTree ETF's are responding based on the Monthly Performance report of Nov 30. Do you see these returns continuong steadily month to month or will the variations be dramatic month to month.

    In specific would DBU, as a utility fund, be a constant performer?
    Miles     Reply
  • commenter
    David
    Jackson
    Dec 14 02:17 PM
    My Website
    Interview: Luciano Siracusano, Director of Research for ETF Firm WisdomTree Asset Management [view article]
    Luciano, just a quick thank you for the care with which you're answering these questions. It's amazing to see such an intelligent and open discussion -- far more interesting and thoughtful than most interviews allow for. Thank you again! Reply
  • commenter
    Luciano
    Siracusano
    Dec 14 02:14 PM
    Interview: Luciano Siracusano, Director of Research for ETF Firm WisdomTree Asset Management [view article]
    Matthew, in response to your first question:

    Suitability depends on the client and the investment objectives that need to be met. WisdomTree’s goal has always been to create viable alternatives to cap-weighted indexes in every major market segment and across major regions of the developed world. If we look at how allocations are made in the real world -- by financial advisors, consultants and investment committees -- some of the greatest pools of capital are benchmarked to indexes in the US. large-cap space. WisdomTree has four domestic funds that are predominantly largecap (DTD, DLN, DHS, and DTN). They meet different needs depending on how much selection risk one wants to take and whether the goal is to gain large-cap exposure with generally lower historic betas, or the goal is to provide a fundamental alternative to large-cap capitalization-weighte... indexes. If you had an interest in the international small-cap space, you had no U.S.-listed ETFs to choose from until WisdomTree came to town. Now you have three choices from WisdomTree -- DLS, DFE and DFJ – including ETFs that give exposure to Japanese small-cap and European small-cap companies. We believe WisdomTree has tools that investors can use to create global dividend-based portfolios. At WisdomTree, we don’t give investment advice. We just provide fundamentally-weighted alternatives to traditional cap-weighted index funds.     Reply
  • commenter
    Luciano
    Siracusano
    Dec 14 01:43 PM
    Interview: Luciano Siracusano, Director of Research for ETF Firm WisdomTree Asset Management [view article]
    Roger, it was nice to meet you in Phoenix. I enjoy reading your insights on the ETF industry and congratulate you for the following you are developing via your blogging on Seeking Alpha.

    The reason Total SA (FP FP) is not in the top ten holdings for DEW, the WisdomTree Europe High-Yielding Equity Fund, is that Total SA is not in DEW’s underlying Index: the WisdomTree Europe High-Yielding Equity Index (WTEHYE). The company Total SA did not qualify for inclusion in WTEHYE, which is a sub-set of the WisdomTree Europe Dividend Index (WTEDI). WTEDI serves as the underlying index for DEB, the WisdomTree Europe Total Dividend Fund.

    All of our high-yielding equity indexes are created by ranking the stocks within WisdomTree’s "broad market indexes” by dividend yield, and then selecting the top 30% of the companies based on dividend yield that meet our other inclusion requirements (there is a higher threshold for market capitalization and liquidity). Then these indexes are weighted once a year by the magnitude of the cash dividends companies pay – so larger companies with more shares outstanding, paying greater aggregate dividends, typically get larger weights. The reason Lloyds TSB Group (LLOY LN) has a different rank is for the same reason. Some of the companies that paid larger cash dividends than Lloyd’s did not qualify for inclusion in the high-yielding subset because their dividend yields were not high enough at the annual screening point. One final point: these rankings and weightings reflect dividend yields and company contributions to the dividend streams of their respective regions at a snapshot in time, once a year. To limit turnover, weights during the year are not adjusted for increases or decreases in dividend per share, or for share issuances or share buybacks, so the weights during the year will change based on fluctuations in the stock price of the individual components. The beauty of dividend weighting is that it incorporates into the index a rules-based mechanism that adjusts annually, for what we believe, is relative value. In our research we were able to quantify the impact such dividend weighting had on overall returns and volatility compared to comparable cap-weighted indexes. Our research indicated to us what the characteristics of these indexes would have been had they existed, in every part of the developed world and in every major market cap segment, before we ever launched an ETF to track them.

    The performance and characteristics of the WisdomTree Indexes prior to June 1, 2006 is based on a back test, i.e. calculations of how an index might have performed in the past had it existed. Hypothetical back tested performance has inherent limitations and is not indicative of future results. Index performance data assumes reinvestments of dividends and does not reflect management fees, transaction costs or other expenses. You cannot invest directly in an index.

    For more information on WisdomTree index construction and current constituents, please visit wisdomtree.com. We have updated information on both the indexes and the WisdomTree ETFs.     Reply
  • commenter
    Luciano
    Siracusano
    Dec 14 01:15 PM
    Interview: Luciano Siracusano, Director of Research for ETF Firm WisdomTree Asset Management [view article]
    David, this is an important question but it is theoretical and speculative and it does not lend itself to a sound-byte answer. I just can’t answer questions about what “should” happen in the future. All I can do is relay what we and others have observed as having happened – based on either real-time index calculations or in simulations based on data of past market performance. If you are interested in why dividends play such a vital role in the total return of stocks, I would recommend Professor Jeremy Siegel’s latest book, The Future For Investors. In my view, several of the chapters in the book on dividends are excellent. In the interest of full disclosure, Professor Siegel is a board member of WisdomTree Investments and consults to WisdomTree in his capacity as Senior Investment Strategy Advisor. Reply
  • commenter
    Luciano
    Siracusano
    Dec 14 01:09 PM
    Interview: Luciano Siracusano, Director of Research for ETF Firm WisdomTree Asset Management [view article]
    Hi guys, I'm back. David, now to your second question:

    This question of expense ratios and ETFs is really very interesting, as I think it captures how the ETF industry has been evolving. When BGI, State Street and Vanguard launched their domestic ETFs tracking traditional cap-weighted indexes, their expense ratios for domestic ETFs were really quite low – reinforcing one of the great strengths of ETFs. These were liquid, transparent, low-cost ways to own large segments of the market in a single fund that trades on a stock exchange like a stock. Over the past few years, new ETFs have emerged – ones that tracked indexes based on less transparent indexes, what some have called “black box” selection and weighting strategies. These ETFs have generally carried higher expense ratios and track more narrowly focused areas of the market. Some contain special bells and whistles. WisdomTree bucked this trend by creating ETFs that cover broad segments of both domestic and international markets, that are based on transparent, fundamentally-weighted indexes, and that we believe are priced competitively: 28 to 38 basis points domestically, and 48 to 58 basis points internationally.

    Where is the ETF industry headed? I think ETFs will ultimately mirror what is happening in the indexing industry. So if the great debate going forward in the world of indexing is not “active versus passive, “ but “passive versus passive,” then I would expect the ETF industry to ultimately end up with cap-weighted ETF providers on one side and fundamentally-weighted ETF providers on the other. WisdomTree is at the heart of that debate and I trust you know on which side we stand.     Reply
  • commenter
    David
    Jackson
    Dec 14 11:26 AM
    My Website
    Interview: Luciano Siracusano, Director of Research for ETF Firm WisdomTree Asset Management [view article]
    Thanks Luciano!

    On the case for dividend stocks, do you think the case for them is statistical, or also theoretical -- ie. that dividend stocks *should* perform better, not just *have* performed better?     Reply
  • commenter
    Luciano
    Siracusano
    Dec 14 10:47 AM
    Interview: Luciano Siracusano, Director of Research for ETF Firm WisdomTree Asset Management [view article]
    Thanks for the questions, David.

    I disagree that the case for dividend-paying stocks is “weak,” as you put it. First, let me just say that WisdomTree’s approach is not based on a moment in time, or what is happening this week or even this year. It is based on research spanning many decades. However, if you want to limit this discussion to 2006, if you look at today’s Wall Street Journal in the Money & Investing section and turn to Lipper’s stock fund indexes, you will see that the “Equity Income Fund” category is the best performing domestic fund category this year, up 17.65%. So, I believe you can make the opposite case: that dividend-paying stocks in 2006 have actually shown relative strength compared to the rest of the U.S. market.

    With respect to your question on expense ratios, I have an answer for you. But I need to step out into a meeting now and will be returning at around 1:00 est. I will answer it then and continue answering your questions throughout the day.     Reply
  • commenter
    Luciano
    Siracusano
    Dec 14 10:05 AM
    Interview: Luciano Siracusano, Director of Research for ETF Firm WisdomTree Asset Management [view article]
    complicated question. let me come back to it. Reply
  • commenter
    Luciano
    Siracusano
    Dec 14 10:04 AM
    Interview: Luciano Siracusano, Director of Research for ETF Firm WisdomTree Asset Management [view article]
    Yiqing, you are correct that Morningstar characterizes this fund that way. It is also true that Morningstar lists the average market cap for DLS as of October 31, 2006 as $1.4 billion. So I think a lot of this discussion revolves around how we define “smallcap.” Definitions of what is considered smallcap vary by portfolio manager and by where we are in the market cycle. For example, if you check the top 20 holdings in both the Russell 2000 and the S&P 600 indexes, two domestic smallcap indexes, you will see that the great majority of their top 20 holdings have market capitalizations between $2 billion and $3 billion. So I think definitions of smallcap are more accurately tied to what percentage of the overall market the so-called “smallcap segment” represents. I believe if you check Morningstar’s website they actually do it this way: Morningstar defines the top 70% of the market capitalization of an equity universe as “largecap”; the next 20% is considered “midcap”; and the remaining segment, typically under 10%, is characterized as “smallcap.” If you use those parameters Morningstar has established for the domestic US market and apply them to international markets, I believe you will see that is roughly where the WisdomTree International LargeCap Dividend Index, WisdomTree International Midcap Dividend Index and WisdomTree International Smallcap Dividend Index break out by market capitalization. They are cut once a year based on defined parameters designed to capture market cap size segments from the WisdomTree DIEFA index, which today covers approximately $16.5 trillion in international market capitalization across 21 developed world equity markets. Reply
  • commenter
    Luciano
    Siracusano
    Dec 14 09:46 AM
    Interview: Luciano Siracusano, Director of Research for ETF Firm WisdomTree Asset Management [view article]
    You are right I can’t comment on WisdomTree funds that are currently in registration, nor on any related indexes. Reply
  • commenter
    Luciano
    Siracusano
    Dec 14 09:44 AM
    Interview: Luciano Siracusano, Director of Research for ETF Firm WisdomTree Asset Management [view article]
    abbi, let me think about this a little more and come back to you later.
    thanks,
    Luciano     Reply
  • commenter
    Luciano
    Siracusano
    Dec 14 09:43 AM
    Interview: Luciano Siracusano, Director of Research for ETF Firm WisdomTree Asset Management [view article]
    With respect to your second question:

    It is true that WisdomTree competes against some of the greatest names in asset management today. However, in our view, WisdomTree has a number of unique competitive advantages. We believe WisdomTree’s proprietary research has produced an innovative product strategy. We were first to market with a family of fundamentally weighted ETFs and expect to continue to grow as market awareness of WisdomTree grows. Early customer response seems to show significant interest in our approach and we are encouraged that our ETFs have attracted $1.3 billion in assets under management in just 6 months. Additionally, we have an experienced management team; in fact, a number of our senior people came from Barclays.     Reply
  • commenter
    Luciano
    Siracusano
    Dec 14 09:29 AM
    Interview: Luciano Siracusano, Director of Research for ETF Firm WisdomTree Asset Management [view article]
    Well, I think there may be one too many cap-weighted ETFs. (:

    Seriously though, I am curious if the same people who say that having 300 ETFs are “too many” say the same thing about having 8,000 mutual funds or 10,000 hedge funds. Honestly, I think the best way to answer this is “compared to what?” Actively managed mutual funds, on average, have higher fees than ETFs, are less liquid, are less transparent, and are less tax efficient. Yet there are more than 8,000 of them. I think some may be thinking about this issue backwards. What do you guys think?     Reply
  • commenter
    Luciano
    Siracusano
    Dec 14 09:21 AM
    Interview: Luciano Siracusano, Director of Research for ETF Firm WisdomTree Asset Management [view article]
    WisdomTree differs from some of the other ETF managers in that it offers dividend-based ETFs that cover major market capitalizations across large regions of the developed world. WisdomTree indexes are typically weighted based on the cash dividends companies pay, so larger companies tend to get larger weights in the WisdomTree indexes. We call this weighting by the “Dividend Stream.” The other ETFs you’ve mentioned are typically based on specialty dividend indexes of 50 or 100 stocks. DVY and PEY, because of the selection and weighting methodologies of their underlying indexes, have considerable mid-cap biases. The Dow Jones dividend index is weighted based on dividend per share. The Mergent Dividend Achievers Index, which PEY is designed to track, is weighted based on dividend yield. This results in very different portfolios compared to weighting by the Dividend Stream. WisdomTree created two domestic indexes that select stocks with high dividend yields. But these two indexes, and the ETFs that are designed to track them – DTN and DHS – have much greater exposure to large-cap stocks. I think that is an important distinction. Reply
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