PowerShares Unleashes Financial Sector ETFs

December 2nd at 3:00pm by Tom Lydon

Invesco PowerShares announced that four new exchange traded funds (ETFs), based on Keefe, Bruyette & Woods, Inc., aka KBW Indexes. They began trading Thursday on the NYSE Arca.

The latest portfolios from PowerShares provide investors with access to a various sub-sectors within financials, including real estate investment trusts (REITs), financial services, and property & casualty insurance market sectors. [6 Reasons to Consider Financials.]

The portfolio names and ticker symbols are listed below:

  • PowerShares KBW Premium Yield Equity REIT Portfolio (NYSEArca: KBWY): This ETF uses a dividend yield weighted methodology that seeks to reflect the performance of about 24 to 40 small- and mid-cap equity REITs in the United States.
  • PowerShares KBW High Dividend Yield Financial Portfolio (NYSEArca: KBWD): Seeks to reflect the performance of approximately 24 to 40 publicly listed financial companies that are principally engaged in the business of providing financial services and products, including banking, insurance and diversified financial services, in the United States.
  • PowerShares KBW International Financial Portfolio (NYSEArca: KBWX): Based upon a market capitalization-weighted index, which is comprised mainly of American Depository Receipts (ADRs), that seeks to reflect the performance of approximately 60 non-U.S. financial companies that are principally engaged in the business of providing financial services and products, including banking, insurance and diversified financial services.
  • PowerShares KBW Property & Casualty Insurance Portfolio (NYSEArca: KBWP): Based upon a modified market capitalization-weighted index that seeks to reflect the performance of approximately 24 property and casualty insurance companies.

InvescoPowerShares’ Managing Director Ben Fulton says the provider selected KBW as the index provider because they’ve long been viewed as an industry leader in the areas of research, corporate finance, mergers and acquisitions, and sales and trading for financial services companies.

“We believe that their indexes are some of the most innovative and unique indexes in the financial sector,” Fulton says.

Investors may view these funds as a chance to earn some yield, an appealing prospect in this day and age.

“We think one of the reasons that investors may consider these funds right now is due to the attractive yield that these funds may offer,” says Fulton. “Over the course of the last year, the ETF industry has seen stead inflows into products that offer a respectable yield.”

Another appealing aspect of the ETFs, Fulton says, is that they provide investors with institutional level expertise with a single trade.

“The primary goals of these portfolios are to offer the potential of capital appreciation and dividend income.”

The launch of these ETFs seem well-timed: REITs have been outperforming the markets and Goldman Sachs went bullish on the sector on Thursday for the first time since the credit crisis. As a beaten-down sector, it has a long climb back to health. Many of the broad funds are still 50% and 60% off their 2007 highs. Before jumping in, check the trend lines. Many have gotten close, but have not crossed just yet.

Tisha Guerrero contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.