I remember being a tad confused by PowerShares' listing of two different product lines of sector ETFs. One is in conjunction with Rob Arnott's fundamental indexing and the other is the Intellidex method that has generally been successful.I would be hard pressed to explain the difference without just BS-ing you.
The chart compares financial sector ETFs; the Arnott version (PRFF), the Intellidex version (PFI) and the Financial Sector SPDR (XLF). You can decide for yourself whether performance difference is enough to matter.
There are some composition difference which is a bit of a surprise to me. I figured Citigroup, Bank of America (client holding) and JP Morgan would be the top three holdings in each fund. Well that is the case with XLF, actually AIG is number three and JP Morgan is number four. PRFF is similar with C, BAC and JPM as the top three but with smaller weights than in XLF. PFI is unique in that none of the megacaps are in the top ten but BAC is close. Maybe the reduced mega cap exposure is what has caused it to lag in the last few months.
PFI's average market cap is $21 billion and for PRFF it is $76 billion. I am not sure the Intellidex method will allow for the market cap to ever be like the other funds, if not then it will always look different which might be a good thing.
For now the market does not care about these; the average volume for PFI is 7300 shares and for PRFF it is 996 (that is not a typo). I was not able to find info about how much is invested in these funds but it is probably not much.
For what its worth the Rydex Equal Weight Financial Fund (RYF), which I think is the newest sector product, averages 32,000 shares traded. This is probably because it really does capture something different or at least that is the perception created. I could not find the average market cap of RYF on the Rydex site but I would not be surprised if it was similar to PFI.
I have been of the opinion all along that there would be a lot of funds that don't bring a lot to the table and for now it looks like PFI and PRFF should be added to that list. It makes sense to look under the hood a little bit as was done here but I don't see these adding much value now.
3 comments:
Roger, any thoughts on large cap Asia ETFs like ADRA vs whatever. ADRA has low to ok daily volume but lots of intraday gaps. Limit orders are a must.
fwiw...look for other more traded alternatives...like epp. know why you prefer that particular etf when volume is low. accept mkt orders as the cost of doing busineess. ain't much if a long term hold. can split bid and ask if spread is big, but you could end up loosing it or chasing it. i struggle with bid-ask spreads, too, and wonder what the discretinary brokers who are now just usingetfs do...they are trading big blocks...my guess is that they limit their universe of etfs.
my question: roger, when the dividends are being paid out and the share price gets slammed TA of a price chart can get distorted...do the charts ever adjust to incorporate the pay out?
tomk. Have you seen this paper on
acceleration, i'll be pretty impressed if i can distill actionable strategies and still "know" strengths and limitations. Beginning to sense that roc needs to be measured just for certain periods that do not routinely have end dates in the present. Bill
:http://207.36.165.114/Denver/Papers/momentumpaper.pdf
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