Invesco Powershares announced today that The Technical Leaders ETFs recently crossed over $1 billion in assets under management. Click here for a full copy of the press release .
All of the Powershares DWA Technical Leaders indexes are based on the concept of “Relative Strength”, a measure of a stock’s performance in relation to other investment options. For each index, Dorsey, Wright & Associates does comparative analysis across a universe of several thousand stocks, and selects the 100 or 200 companies with the highest Relative Strength.
The Technical Leaders ETFs began 2012 with $642 million in assets, and crossed over the $1 billion milestone in December. Tom Dorsey, President of Dorsey, Wright & Associates attributes the rapid growth to recognition by the market that relative strength strategies are a valuable part of a diversified portfolio. “I think there was always market interest in these ETFs because they were unique. As we have built a performance record, that interest has increased.”
History of the DWA Technical Leaders ETFs
The first Technical Leaders ETF was the “Powershares DWA Technical Leaders Portfolio” (PDP), which was introduced in March, 2007. PDP focuses on US mid and large cap equities, and is the largest of the 4 funds, with $771 million in assets. The PDP selects only the 100 strongest companies, based on relative strength from amongst the 3000 largest US-listed companies.
Two international portfolios were then introduced in December of 2007 – the “DWA Emerging Markets Technical Leaders” (PIE) and the “DWA Developed Markets Technical Leaders” (PIZ). These two funds collectively hold $408 million in assets. The 4 th in the lineup, the DWA Small Cap Technical Leaders (DWAS), was introduced in July of 2012. All of the Technical Leaders operate using the same Relative Strength investment methodology, though DWAS holds 200 stocks, where the others each hold 100.
Investment methodology and holdings
Because the funds invest selectively, the Technical Leaders ETF portfolios are adaptive to market changes, and holdings can differ significantly from broad market indexes. For instance, DWA’s Emerging Markets Index (PIE) has almost 14% of assets in Indonesia, while the MSCI Emerging Markets Index (MSCI EM) has just over 3% there. Conversely, PIE has just over 4% of its assets in China, compared to over 17% for MSCI EM. Mike Moody, Senior Vice President and Portfolio Manager for Dorsey Wright, said: “For the international funds, our methodology involves rigorous analysis of the relative strength of each country and the companies within it, and we concentrate investments in the countries and companies with highest relative strength.”
Even within the US markets, holdings can differ significantly by sector. PDP is currently most heavily weighted in Financials and Consumer Discretionary, while the top 2 sectors in the S&P 500 are Information Technology and Energy. PDP ranks Information Technology, the S&P 500’s weightiest sector, 6 th out of the 10 sectors.
Tom Dorsey sees a bright future for the Technical Leaders lineup. “Part of the challenge in growing these funds is that mainstream investment models tend to focus on static indexes” he said. “We believe, however, that money managers are increasingly seeking out well-designed alpha-seeking investments like Technical Leaders . They have proven that they can improve performance and overall diversification of a portfolio.”
Technical Leaders Webinar, Thursday, January 17, 12:15 pm EST
Tom Dorsey, President of Dorsey, Wright & Associates, and Tammy Derosier, Executive Vice President, will host a free webinar on January 17 to discuss the relative strength strategies behind the Technical Leaders ETFs. Click here to register .