Exchange traded fund (ETF) managers have taken a cue from hedge funds and mutual funds and created ETFs that specifically hold shares of other ETFs. It’s like a one-stop-shop for investors.
The proliferation of ETFs has given way to some creative ETF ideas and strategies, and they keep getting even more creative. PowerShares introduced three funds of funds in May, one of which was PowerShares Autonomic Balanced Growth NFA Global Asset Portfolio (PAO). The expense ratio is at 0.25% and the ETF has gathered $8 million in assets.
The two other ETFs that take this strategy are:
- PowerShares Autonomic Balanced NFA Global Asset Portfolio (PCA)
- PowerShares Autonomic Growth NFA Global Asset Portfolio (PTO)
All three funds have 30 holdings and charge 0.25% for the expense ratio and underlying fees are applicable due to assets, explains Zoe Van Schyndel for The Motley Fool.
The funds are a mix of equity and fixed-income and can underperform the general market. The diversification can serve well in a portfolio and can serve as a core holding. The one-stop approach is simple and effective, especially as a big time-saver for the investor who just wants to set it and forget it. One caveat is that the cost can be relatively high, because of the fees for the fund, plus the fees in the underlying funds.
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.