Powershares has filed paperwork with the SEC for a “PowerShares International Corporate Bond Portfolio ETF.” The Fund’s Shares will trade on NYSE Arca under the symbol (PICB). PICB will seek investment results that correspond (before fees and expenses) generally to the price and yield performance of the index called the S&P International Corporate Bond Index® (the “Underlying Index”). This new ETF will go head to head with the SPDR Barclays Capital International Corporate Bond ETF” (IBND) which is set to begin trading tomorrow.
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Principal Investment Strategies
The Fund will normally invest at least 80% of its total assets in corporate bonds. The Fund will normally invest at least 80% of its total assets in the securities that comprise the Underlying Index. The Underlying Index measures the performance of investment grade corporate bonds issued by non-U.S. issuers in the following currencies: Australia Dollar (AUD), British Pound (GBP), Canadian Dollar (CAD), Euro (EUR), Japanese Yen (JPY), Swiss Franc (CHF), Danish Krone (DKK), New Zealand Dollar (NZD), Norwegian Krone (NOK) and Swedish Krona (SEK). The Fund does not purchase all of the securities in the Underlying Index. Instead, the Adviser utilizes a “sampling” methodology in seeking to achieve the Fund’s investment objective. The Underlying Index is generated and published under an agreement between Standard & Poor’s® and Credit Suisse.
Concentration Policy. The Fund will invest 25% or more of the value of its total assets in securities of issuers in an industry or group of industries to the extent that the Underlying Index concentrates in an industry or group of industries.
Additional Information About the Fund’s Strategies and Risks:
Principal Investment Strategies
Additional information about the Fund’s Underlying Index construction is set forth below.
The Underlying Index is reconstituted and rebalanced monthly. For inclusion in the Underlying Index, each bond must meet a minimum threshold for the total outstanding value of such bonds. This threshold will vary with the currency in which the bond is denominated. Each Underlying Index constituent must be rated investment grade by Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. or Moody’s Investors Service, Inc. Each security’s lower rating is used to determine eligibility for the Underlying Index. Temporary unrated tapped issues, in which the issuer reopens and sells debt instruments from past eligible rated issues, may be included in the Underlying Index. The weighting of each bond is based on its outstanding market value, which is set at the monthly rebalancing, and exposure to a single currency is capped at 50% at each monthly rebalancing. If there are more than ten eligible issuers for a given currency on the date of rebalancing, 25% of the lowest yielding bonds denominated in that currency will be removed from the universe of eligible instruments in order to enhance the yield of the Underlying Index.
The weight of a bond is first calculated by dividing the outstanding Underlying Index market value for the bond by the total outstanding Underlying Index market value for the eligible universe, with all figures being converted to U.S. dollars using spot foreign exchange rates as of the monthly rebalancing date. Then, the aggregated weight for each currency is calculated. If the aggregated weight for a currency is above the 50% cap, the weighting of each bond in this currency is modified by multiplying the initial weight by (0.5/aggregated weight) so that the modified aggregated weight for this currency is at 50%. The excess weight above the 50% cap is distributed to the remaining currencies according to each currency’s aggregated weight.
The Fund, using an “indexing” investment approach, attempts to replicate, before fees and expenses, the performance of the Underlying Index. The Adviser seeks correlation over time of 0.95 or better between the Fund’s performance and the performance of the Underlying Index; a figure of 1.00 would represent perfect correlation. The Fund does not purchase all of the securities in the Underlying Index. Instead, the Adviser utilizes a “sampling” methodology in seeking to achieve the Fund’s objective. Sampling means that the Adviser uses a quantitative analysis to select securities from the Underlying Index universe to obtain a representative sample of securities that resemble the Underlying Index in terms of key risk factors, performance attributes and other characteristics. These include industry weightings, market capitalization and other financial characteristics of securities. The quantity of holdings in the Fund will be based on a number of factors, including asset size of the Fund. The Adviser generally expects the Fund to hold less than the total number of securities in the Underlying Index, but reserves the right to hold as many securities as it believes necessary to achieve the Fund’s investment objective. The Fund may sell securities that are represented in the Underlying Index in anticipation of their removal from the Underlying Index, or purchase securities not represented in the Underlying Index in anticipation of their addition to the Underlying Index.
For the full prospectus click: HERE