In 2011, PowerShares launched both SPLV (PowerShares S&P 500 Low Volatility Portfolio, Expense Ratio 0.25%) and SPHB (PowerShares S&P 500 High Beta Portfolio, Expense Ratio 0.25%) and SPLV especially has made waves in terms of raising assets ($3.9 billion currently) amid institutional and retail appetite for “Low Vol” equity exposure.
SPHB has a fraction of these assets, at about $182 million, but given the rocky ride most equity investors experienced from 2008-2009 and again in 2011, this makes sense to us.
What caught our attention recently is the realization that both funds are approaching their all-time highs once again (SPLV’s previous high was reached earlier in May while SPHB’s all-time high was in early April).
SPHB is Large Cap equity exposure clearly (S&P 500), and the index methodology scans the S&P 500 Index itself for 100 stocks that, according to fund literature, have demonstrated “the highest sensitivity to market movements, or beta, over the past 12 months.”
So the fund is dynamic and recent to an extent, in that it is constantly using a 12 month trailing period in examining and selecting the 100 stocks that may be included. For, most of 2014 for example, there has
been a clear dichotomy in certain sector returns that really anyone can see clearly, with things like Energy and Consumer Staples stocks seeing a mostly unabated rally after the February dip, amid little volatility for the most part while other sectors like Social Media literally riding the roller coaster.
SPLV which we have described in length in the past uses the same methodology within the S&P 500 Index, only on a “low volatility” screening basis.
What are the largest sectors represented in the “High Beta” portfolio currently? Interestingly, more than 43% of the portfolio is in Financial Services and Consumer Discretionary names, while SPLV has its largest exposure to Utilities (25.27%) followed by Consumer Staples (18.30%).
What is particularly interesting is that we think most investors might automatically draw the conclusion that a “High Beta” portfolio would heavily lean toward Technology stocks just because that’s what most are accustomed to. But again, this is a data driven approach, that is examining actual betas in the marketplace on a trailing 12 month basis, and the data suggests, at least within the large cap universe (S&P 500), that Technology stocks have only been fifth sensitive sector in terms of beta, and worth a 11.46% weighting currently.
Even if investors choose not to purchase and use such ETF products at the moment, just examining the portfolio holdings from a name and sector standpoint periodically gives a good feel for what has happened, and what has shifted for interested stock pickers.
PowerShares S&P 500 High Beta Portolio
For more information on Street One ETF research and ETF trade execution/liquidity services, contact Paul Weisbruch at pweisbruch@streetonefinancial.com.
Street One Financial is an educational/research firm utilizing the Broker Dealer services of Precision Securities, a FINRA registered Broker/Dealer.