The PowerShares DWA Technical Leaders ETF (NYSEArca:PDP) hit an
asset milestone recently when it and three sister funds together
reached $1 billion in assets, as noted by my colleague Olly
PDP is the largest of the four DWA Technical Leader
, covering U.S. equities and boasting $771 million in assets. Its
assets under management benefited from strong returns in 2012 and,
even more so, from net inflows of $200 million in 2012.
I'll dive into the returns in a moment, but the inflows story
definitely caught my eye too.
One of 2012's themes was net investor money flowing from mutual
funds and into ETFs, the implication being a trend away from
actively managed stock selection-i.e., mutual funds-and into staid,
passive index investing in the form of ETFs.
However, ETFs like PDP aren't staid or passive. Sure, PDP
follows an index. But its underlying index bears little resemblance
to a purely passive take on the equity market.
PDP functions more like a "quasi-active" fund, with high
portfolio turnover of 96 percent over the last fiscal year,
according to the prospectus.
With $200 million in new money into this fund, investors are
signaling they're quite comfortable with stock-picking. It's just
the high fees and loads that come with some stock-picking mutual
funds that they're not so fond of anymore.
PDP charges 67 basis points annually-$67 for every $10,000
invested-which is not cheap compared with some truly passive U.S.
equity ETFs, but still less than the all-in costs of many active or
quasi-active mutual funds, especially those with loads.
PDP trades and tracks well too, so all-in costs should be very
close to its headline fee.
PDP launched in March 2007, so it has a nice long record to
I'll use a plain-vanilla, market-cap-weighted fund for
comparison; namely, the Vanguard Total Stock Market ETF
(NYSEArca:VTI). VTI makes a good strong benchmark in that it
represents the passive market very well, and its all-in cost is
So how does PDP stack up?
I looked at one-, three- and five-year periods broken neatly by
calendar year-just 2012; 2010 through 2012; and 2008 through 2012,
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