Expanding on its popular high-yield low-volatility strategy, Invesco PowerShares launched two new multi-factor-based exchange traded funds that combine high dividends and low instability features.
The PowerShares S&P International Developed High Dividend Low Volatility Portfolio (BATS: IDHD) and PowerShares S&P SmallCap High Dividend Low Volatility Portfolio (BATS: XSHD) began trading Thursday. Both new funds come with a 0.30% expense ratio.
The high dividends factor may be attractive for income-minded investors as government stimulus across global economies push bond yields to historic lows. Moreover, the low volatility factor could allow investors to participate in the growth of riskier equities while diminishing potential drawdowns during broad market sell-offs.
According to PowerShares, a strategy that looks to high-dividend payers and low-volatility stocks could benefit investors using an income buffer with added defensiveness through companies that have demonstrated less sensitiv8ity to market changes, potentially helping investors generate improved risk-adjusted returns over the long run.
“Blending factors can be a key to unlocking their diversification power,” Dan Draper, Global Head of PowerShares by Invesco, said in a press release. “Combining high dividend and low volatility factors in our two newest ETFs may also provide investors with more defensive access to equity income in the face of uncertain markets.”
IDHD targets the highest-income-producing stocks in international developed markets and then implements a low volatility screen to select the 100 least volatile companies over the past 12 months to diminish the risks associated with high-yield stocks. The screen process may help the ETF target more attractive valuations when selecting equities.
Country weights include Singapore 16.2%, Australia 15.0%, U.K. 11.2%, New Zealand 10.6%, Hong Kong 10.5%, France 7.4%, Germany 4.5%, Spain 4.2%, Sweden 3.7% and Norway 3.2%.
Sector tilts include utilities 19.2%, industrials 14.6%, real estate 14.6%, telecom 14.2%, financials 10.6%, consumer discretionary 8.2%, consumer staples 5.4%, materials 4.2%, information technology 4.2%, health care 3.5% and energy 1.4%.
XSHD employs a similar screen process, focusing on U.S. small-capitalization stocks taken from the S&P SmallCap 600 Index and then adding a similar low volatility screen.
Sector allocations include real estate 15.5%, consumer staples 11.6%, financials 10.7%, industrials 10.5%, utilities 10.3%, materials 10.0%, information technology 9.6%, consumer discretionary 7.8%, health care 7.6% and telecom 6.3%.
The two new ETFs will join the $2.6 billion PowerShares S&P 500 High Dividend Portfolio (NYSEArca: SPHD), which targets S&P 500 companies exhibiting high yields and low volatility.
For more information on new fund products, visit our new ETFs category.