PowerShares, one of the largest ETF providers both by AUM and
total funds, hasn't exactly launched a great deal of funds so far
in 2012. In fact, the company has been relatively stable in terms
of its lineup, having issued just five ETFs in the first nine
months of the year.
However, this trend could be changing as we enter the final
part of the year, as numerous launches from a number of other
issuers have put the pressure on PowerShares' product development
team in order to debut some more funds. This trend, along with
the general market focus at this time, has pushed the company to
debut a brand new ETF, the
S&P 500 High Dividend Portfolio (
, marking the company's first launch since July (read
Three Overlooked High Yield ETFs
This new product will track the S&P Low Volatility High
Dividend Index, giving exposure to large and mid cap firms that
have outsized payouts and that are less volatile than the broad
market. This combination could generate a great deal of interest
from investors thanks to the shaky market situation and the
increased focus on yield in today's low rate environment.
The product will also be a low cost choice as it charges just
30 basis points a year in fees and hold 50 securities in total.
The fund will be rebalanced and reconstituted twice a year, in
both January and July.
According to a recent press release
, this focus will result in a yield of roughly 4.5%, easily
beating out broad bond benchmarks, and many other income focused
securities as well.
In terms of the portfolio, the focus on low volatility and
dividends skews the holdings towards utilities (21.8%), staples
(16.3%), financials (12.8%), and telecoms (10.2%). Meanwhile, the
ETF is light in materials, technology, energy and discretionary
stocks, as these four sectors each account for less than 6% of
assets each (also see
High Yield Bond ETF Showdown
Unsurprisingly, this also results in a value tilt as the fund
has roughly half its assets in large cap value, with just 7%
going to large cap growth stocks. However, it should also be
pointed out that mid caps take up a big chunk of assets too, with
value in this segment making up about one third of the total.
While this is an interesting product that is in a clearly
in-demand market segment, it is a very competitive one as well.
There are numerous ETFs that have a dividend focus that target
U.S. large and mid cap stocks, suggesting that SPHD could have a
rough battle for assets (see
12 Ways to Earn High Yields with ETFs
Still, most ETFs targeting the U.S. market use only one of the
low volatility or high dividend approaches, meaning that there
are few crossover products in this space that combine both of
these key attributes. Seemingly one of the only low volatility
high dividend ETFs currently on the market right now is EGShares'
This ETF, however, has a focus on emerging market securities
giving it an entirely different focus than the just released
SPHD. Yet, it should be noted that this EGShares product has seen
some decent inflows since its inception a little more than a year
ago, suggesting that there definitely could be a big appetite for
high income and low volatility products, especially given the
current market conditions (also see
The Truth about Low Volume ETFs
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EGS-LO VT EM DV (HILO): ETF Research Reports
(SPHD): ETF Research Reports
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