The gang over at PowerShares rolled out a bunch of sector ETFs based on Robert Arnott's method of fundamental weighting. I am sure some people will immediately will say we have enough sector ETFs, and maybe we do, but from where I sit if only one or two of them provide a better way to access a sector and the rest turn out to be duds that is OK.
Quite a few of the PowerShares product line does well, performance-wise, and draws a lot of volume. Their success allows them to venture further out and try new ideas. I saw Robert Arnott speak at the NYSE last December and I asked about this methodology being applied to foreign countries he said yes and also various sector which we are seeing today.
The new ETFs are;
PowerShares FTSE RAFI Basic Materials (PRFM)
Consumer Goods (PRFG)
Consumer Services (PRFS)
Energy (PRFE)
Financial (PRFF)
Healthcare (PRFH)
Industrial (PRFN)
Telecom (PRFQ)
Utilities (PRFU)
Small-Mid 1500 (PRFZ)
Obviously that last one is not a sector fund.
I will study all of these in the next few weeks but looking at one random fund I picked the Industrial fund. According to the info sheet General Electric is the largest component at 21%. Yikes. GE is the largest holding in every industrial ETF. It makes up 18.5% of the Industrial Sector SPDR (XLI), 19.5% on Vanguard Industrial ETF (VIS) and 19.8% of iShares Industrial (IYJ).
I'll look at these closer but I will say that I am surprised at the lack of differentiation between PRFN and the others.
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3 comments:
What I've liked about some of the powershares ETFs is their portfolio weightings and quarterly rebalancing. The GE weighting is pretty large in the industrial ETF - that's kind of a shocker.
GE is a big company any way you cut it. Not surprised that its the biggest in the industrials ETF.
IMHO the most interesting is the Small-Mid ETF which provides completion to large cap portfolios. The fundamental weighting keeps out alot of the fluff in the extended market.
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Slightly related, Roger in your most recent TSCM article on FDL, you said that the FDL index description was "opaque". IMHO M* is very open about how they construct FDL as there is an index whitebook on m* indexes website.
MDL Homepage scroll down to "Download PDF's"
I like the powershares, also.
And, I appreciate Roger bringing the FDL to light. It should work.
thanks all
g
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