Beneficial Buybacks

Last week we saw upside call activity in typically lightly traded options, those listed in PKW (PowerShares Buyback Achievers, Expense Ratio 0.60%).

The fund itself has attracted an impressive $290 million year to date in new assets, adding to its existing base of about $2.7 billion in AUM.

While likely not a household name yet, this fund has impressively pulled in new assets in recent years (inception was back in 2006) and now averages about 769,000 shares traded daily. The index methodology concentrates on U.S. listed equities that have “repurchased at least 5% or more of its outstanding shares for the trailing 12 months”, so in layman’s terms companies that are conducting share buybacks in the open market.

Top holdings are currently well-known large cap names: PFE (5.19%), ORCL (5.04%), T (4.95%), HD (4.88%), and GM (3.16%), although the fund itself is classified as “All Cap” and has the ability to invest in mid, small, or micro-cap names, it is just dependent on the reality of share buybacks that are currently occurring in the marketplace.

Since inception back in late 2006, PKW has outpaced an All-Cap benchmark such as the Russell 3000 Index handily, and this has likely attracted new investors to the fund over time. In fact, PKW is now the fourth largest fund in the “All-Cap Equity” category, and given that it could be considered something of a niche fund, this is quite an impressive feat.