Conversely, PFI allocates nearly 46% of its weight to real estate investment trusts (REITs) and with Treasury yields tumbling for over a year, that has been a boon for PFI. The heavy REIT allocation exposes PFI to interest rate risk.
Some may be concerned that REITs are sensitive to changes in interest rates. Notably, the fall in interest rates have made the asset more attractive as a yield-generating alternative, but some fear the asset will fall out of favor once rates rise. [REIT ETFs Keep Soaring]
PFI’s 11.6% weight to the insurance sub-sector provides some relief in the event rates do rise. Rate-sensitive insurance companies and the corresponding ETFs have been decent though market-lagging performers as the group waits on higher interest rates to drive further share price appreciation.
PowerShares DWA Financial Momentum Portfolio