about $2.7 billion in assets under management.
This has encouraged PowerShares to change the exposure profile for a handful of products in its line-up. Now, nine U.S. equity ETFs are undergoing an index change from Intellidex Indices – owned and calculated by NYSE Euronext – to a family of DWA Technical Leaders Indexes, which is developed and calculated by Dorsey Wright & Associates (DWA).
In addition, these ETFs are now trading with a new name but the same old symbol. Below, we have highlighted the new name and index of these ETFs for investors seeking a new play in terms of relative strength investing (see: all the ETF Categories here):
|Symbol||Old Fund Name||New Fund Name||New Index|
|(PYZ)||PowerShares Dynamic Basic Materials Sector Portfolio||PowerShares DWA Basic Materials Momentum Portfolio||DWA Basic Materials Technical Leaders Index|
|(PEZ)||PowerShares Dynamic Consumer Discretionary Sector Portfolio||PowerShares DWA Consumer Cyclicals Momentum Portfolio||DWA Consumer Cyclicals Technical Leaders Index|
|(PSL)||PowerShares Dynamic Consumer Staples Sector Portfolio||PowerShares DWA Consumer Staples Momentum Portfolio||DWA Consumer Staples Technical Leaders Index|
|(PXI)||PowerShares Dynamic Energy Sector Portfolio||PowerShares DWA Energy Momentum Portfolio||DWA Energy Technical Leaders Index|
|(PFI)||PowerShares Dynamic Financial Sector Portfolio||PowerShares DWA Financial Momentum Portfolio||DWA Financials Technical Leaders Index|
|(PTH)||PowerShares Dynamic Healthcare Sector Portfolio||PowerShares DWA Healthcare Momentum Portfolio||DWA Healthcare Technical Leaders Index|
|(PRN)||PowerShares Dynamic Industrials Sector Portfolio||PowerShares DWA Industrials Momentum Portfolio||DWA Industrials Technical Leaders Index|
|PTF||PowerShares Dynamic Technology Sector Portfolio||PowerShares DWA Technology Momentum Portfolio||DWA Technology Technical Leaders Index|
|(PUI)||PowerShares Dynamic Utilities Portfolio||PowerShares DWA Utilities Momentum Portfolio||DWA Utilities Technical Leaders Index|
The new portfolio is based on momentum strategies as measured by Dorsey Wright’s definition of relative strength characteristics. This strategy takes into account the performance of each individual stock in the benchmark rather than the whole index.
Stocks with high relative strength scores (strong momentum) are given higher weights in the index while those with low relative strength scores (weak momentum) are underweighted. This strategy results in a small basket of 30 stocks having positive relative strength characteristics for all the nine ETFs compared with 60 stocks when tracking the Intellidex Indexes. Stocks are selected from a universe of roughly 3,000 stocks in respective sectors, in which the fund belongs.
There seems to be a huge difference between the old and new benchmarks as the number of holdings for each fund is reduced in half. The ETFs will now have only the highest momentum stocks in their portfolio (read: 3 Sector ETFs Braving the Market Slump).
The index change for all the nine ETFs seems beneficial in terms of asset gainers as well as performance if we go by history. This is because PowerShares DWA Momentum suite of ETFs has outperformed their benchmarks over the past few years. As such, the funds shifting to this family could emerge winners for PowerShares in the increasingly competitive ETF market.
This article is brought to you courtesy of Eric Dutram.