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New ETF Debuts Offering Exposure To The S&P 500 Index With A Twist (PHDG)

December 9th, 2012

Stoyan Bojinov: Stocks continue to drift sideways with an upward bias as cautious optimism surrounding the looming “fiscal cliff” has proven to be a dominant theme on Wall Street. Choppy trading has become the norm as mixed data releases have kept a lid on confidence, including lackluster ISM and factory orders data coupled with upbeat construction spending and weekly jobless claims. Amid the uncertain landscape, industry veteran PowerShares has debuted a “hands off” ETF that may provide a refuge from rampant volatility, offering exposure to the S&P 500 Index with a twist.

The PowerShares S&P 500 Downside Hedged Portfolio (NYSEARCA:PHDG) is designed to offer investors broad equity market exposure along with an implied volatility hedge. This new ETF uses a quantitative, rules-based methodology to dynamically allocate its notional investments among three components: equity, volatility and cash [see Low Volatility ETFdb Portfolio ETFdb Pro Members Only].

S&P 500 ETFs With A Twist

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This new addition to the PowerShares lineup is intriguing, but far from unique. Investors can choose from a handful of ETPs that give them the flexibility to access the popular S&P 500 Index with a twist. In fact, PHDG is based on the same strategy as an existing ETN from Barclays iPath; the S&P VEQTOR ETN (NYSEARCA:VQT) is also linked to the S&P 500 Dynamic VEQTOR Total Return Index. However, this competitor charges 0.95% in expense fees versus PHDG’s price tag of only 0.39%.

PowerShares already offers the most popular S&P 500 ETF with a twist; the S&P 500 Low Volatility Portfolio (NYSEARCA:SPLV) has amassed an impressive $3 billion in assets under management since launching in mid-2011. This fund selects 100 stocks with the lowest realized volatility over the past year from the broad index. Other ETFs with a unique take on the well-known S&P benchmark include:

  • Direxion S&P 500 Volatility Response Shares (NYSEARCA:VSPY): This ETF uses a quantitative strategy to shift exposure between the S&P 500 and cash depending on volatility conditions.
  • PowerShares S&P 500 High Beta Portfolio (NYSEARCA:SPHB): This fund holds 100 stocks from the S&P 500 that are deemed to have the highest sensitivity to market movements over the past year.
  • PowerShares S&P Value Line Timeless Select Portfolio (NYSEARCA:SPHQ): This fund selects stocks from the S&P 500 that are deemed to have strong long-term growth and stable earnings.
  • UBS E-TRACS S&P 500 Gold Hedged Index (NYSEARCA:SPGH): This ETN is split 50/50 between long positions in the S&P 500 Index and gold futures contracts.
  • Morgan Stanley S&P 500 Crude Oil Linked ETN (NYSEARCA:BARL): This ETN is split 50/50 between S&P Index futures and an equal-weighted combination of WTI and Brent Crude Oil futures contracts.

Written By Stoyan Bojinov From ETF Database Disclosure: No Positions

ETF Database is committed to giving our audience, consisting of both active traders and buy-and-hold investors, information that, to our knowledge, is truthful and non-biased. [For more ETF insights, sign up for our free ETF newsletter or try a free seven day trial of ETFdb Pro ETFdb Pro Members Only.]


NYSE:BARL, NYSE:PHDG, NYSE:SPHB, NYSE:SPLV, NYSE:VSPY


 

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