Invesco PowerShares rolled out two new smart beta exchange traded funds on Thursday, helping investors target the S&P 500 value segment with a momentum focus and the small-cap category with a quality twist.
PowerShares launched the PowerShares S&P 500 Value With Momentum Portfolio (BATS: SPVM) and the PowerShares S&P SmallCap Quality Portfolio (BATS: XSHQ). SPVM has a 0.30% expense ratio and XSHQ has a 0.29% expense ratio.
“We’re putting client outcomes and investment preferences at the center of our product development process,” Jason Bloom, Global Market Strategist at PowerShares by Invesco, said in a note. “Working closer with clients to understand their unique investment objectives has led to more strategic ETF solutions that have purpose in a portfolio.”
SPVM tries to reflect the performance of the S&P 500 High Momentum Value Index, which tracks 100 stocks within the S&P 500 with attractive valuations that have also exhibited positive forward momentum.
The value metric is based on price-to-boo, price-to-earnings and price-to-sales, with the most attractively valued stocks selected for the next momentum screen. From the 200 most attractively valued stocks, the 100 with the highest positive momentum are then selected for the underlying index and then weighted by their value score.
By combining the momentum screen with a value group, the methodology may identify early movers with upward price movement while also side stepping value traps.
XSHQ tries to reflect the performance of the S&P SmallCap 600 Quality Index, which includes the highest-quality companies taken from the benchmark S&P SmallCap 600 Index based on three quality metrics to single out company’s profitability, earnings quality and financial risks.
The quality metric could enhance risk-adjusted returns by focusing on those with strong balance sheets and proven profitability and earnings quality. Holdings are then weighted by their total quality score multiplied by market cap.
“S&P Dow Jones Indices has seen an increased popularity of its factor indices, and most recently, a growing interest in capturing multiple factors within one benchmark,” Vinit Srivastava, Managing Director of Strategy Indices at S&P Dow Jones Indices, said in a note. “For market participants, the S&P 500 High Momentum Value Index and the S&P SmallCap 600 Quality Index are examples of how factors may be combined or applied across capitalizations.”
For more information on new fund products, visit our new ETFs category.