We are pleased to announce the listing of the PowerShares DWA SmallCap Technical Leaders Portfolio (DWAS) on the NYSE Arca today. This new Fund launches under the NYSE ticker DWAS and represents the first US small-cap ETF based on the concept of relative strength ranking. The PowerShares DWA SmallCap Technical Leaders Portfolio (DWAS) becomes the 4th ETF that Invesco PowerShares has listed based on our “Technical Leaders” indexing strategy since 2007. We are proud to once again partner with PowerShares, who long ago supported the proliferation of “Intelligent Indexing” strategies within ETFs, and would like to share some of the details of this new product with our clients today.
Invesco PowerShares Press Release Regarding DWAS: here
DWA Small Cap Technical Leaders Portfolio Prospectus: here
What are “Technical Leaders”?
Technical Leaders are companies identified by a DWA selection methodology that possess strong relative strength characteristics compared to their peers and industry benchmarks. The existing “Technical Leaders” products have attracted $750 million in assets under management as of June 30, 2012. The current lineup of DWA Technical Leaders products includes:
Technical Leaders Family of ETFs
- PowerShares DWA SmallCap Technical Leaders Portfolio (DWAS)
- PowerShares DWA Technical Leaders Portfolio (PDP)
- PowerShares DWA Emerging Markets Technical Leaders Portfolio (PIE)
- PowerShares DWA Developed Markets Technical Leaders Portfolio (PIZ)
What is the PowerShares DWA Small Cap Technical Leaders Portfolio (DWAS)?
The PowerShares DWA SmallCap Technical Leaders Portfolio (DWAS) is based on the Dorsey Wright SmallCap Technical Leaders Index. The Fund generally will invest at least 90% of its total assets in equity securities of small capitalization companies that comprise the Underlying Index. The Index includes approximately 200 companies pursuant to a proprietary selection methodology that is designed to identify companies that demonstrate powerful relative strength characteristics from a small-cap universe of approximately 2,000 US-listed companies. The Fund is rebalanced and reconstituted quarterly, and operates with an expense ratio of 0.60%.
What is the DWA Small Cap Technical Leaders Index?
The DWA Small Cap Technical Leaders Index is a rules-basedUSequity index developed by Dorsey, Wright and Associates. The index is designed to remain “fully-invested” at all times within approximately 200 US-listed companies, which are selected from a universe of approximately 2,000 US Small Cap companies. This 2,000 stock initial inventory is created as a sub-set of a broaderUSequity pool including approximately 3,000 US-listed securities. DWA employs a proprietary selection methodology built upon a systematic application of relative strength. The methodology is responsible for evaluating all potential investments, ranking them by means of relative strength, and then selecting and weighting them based upon their relative strength ranking. At its core, our process is simply designed to identify companies that demonstrate powerful relative strength characteristics against their peers within a very broad inventory of US small cap securities. We believe this index construction process is robust in its ability to identify stable leadership trends, and adaptive in its ability to rotate as market trends themselves change within the US Small Cap Equity investment category.
How is DWAS different from other US Small Cap Products?
There are of course a number of differences between our new Small Cap Technical Leaders product and existing US Small Cap ETFs. First and foremost, DWAS is not designed to be a “beta” product that seeks to provide broad exposure to the entirety of the US Small Cap investment category through a cap-weighted or equal-weighted indexing approach. A number of products currently exist to satisfy such investment targets, most popularly the iShares Russell 2000 Index Fund (IWM) and iShares S&P 600 Index Fund (IJR), which are both among the 20 largest (by AUM) US equity-based ETFs with more than $20 billion in assets between them. While these funds employ a cap-weighted indexing approach, while the Guggenheim Russell 2000 Equal Weight ETF (EWRS) is an equal-weighted product with similar holdings to IWM. Shares of DWAS are not designed to provide a “beta” alternative to such existing products, but rather access to a more refined category of High Relative Strength securities within a similar inventory as those funds. At any point in time shares of DWAS will likely own about 10% of the securities held within a fund such as IWM, and will hold them in very different quantities, as weightings are driven by strength rather than size.
Furthermore, DWAS is built on the back of an index that can rotate its exposure as needed on a quarterly basis. This creates an adaptive characteristic of the fund that will naturally produce sector weightings often quite a bit different than that of the traditional “beta” products in the US Small Cap space. For instance, the current Technical Leaders index weightings produce quite a bit more exposure to Small Cap Healthcare than does the Russell 2000 Index (21% vs. 12%) while underweighting Small Cap Energy (1% vs. 5%). These sector weights are of course dynamic as well, with Healthcare and Energy having had very similar weightings as recently as 15 months ago within our Tech Leaders index, but shifting surely and steadily in the time since. DWAS does not seek to own all of US Small Cap, but rather to provide efficient access to the existing leadership within US Small Cap.
Please see www.powershares.com for more information. A list of all holdings for the trailing 12 months is available upon request. The Dorsey Wright SmallCap Technical Leaders Index is calculated by Dow Jones, the marketing name and a licensed trademark of CME Group Index Services LLC (“CME Indexes”). “Dow Jones Indexes” is a service mark of Dow Jones Trademark Holdings LLC (“Dow Jones”). Products based on the Dorsey Wright SmallCap Technical Leaders IndexSM, are not sponsored, endorsed, sold or promoted by CME Indexes, Dow Jones and their respective affiliates make no representation regarding the advisability of investing in such product(s).