This ETF Might Benefit From Active Management
If you follow the ETF industry you know that actively managed ETFs are much closer to reality than they were in the past. PowerShares has recently launched an emerging market product with a strategy that, while compelling, might be better suited if the manager had the freedom to reshuffle the holdings more frequently.
The PowerShares DWA Emerging Markets Technical Leaders Portfolio (PIE) screens potential constituents (stocks from just about every emerging market) for relative strength, as index provider Dorsey Wright and Associates sees it, and builds a portfolio of 100 stocks that will hopefully outperform the iShares MSCI Emerging Markets Index Fund (EEM).
PIE has an expense ratio of 0.90% and rebalances its holdings quarterly. As I see it, there are two risks to owning this fund; one is that the relative strength methodology fails to outperform, and the second is its performance may suffer from not being able to rebalance more often in such a volatile market.
PowerShares has a similar fund that owns domestic stocks, the
PowerShares Dorsey Wright Technical Leaders Portfolio
(PDP). It has been trading since March.
| A Strong Lineage
The PowerShares Dorsey Wright Technical Leaders Portfolio has outperformed the S&P since inception.
|Click here for larger image.|
| Backtest of PIE
Dorsey Wright's methodology appears to add value in emerging markets, too.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV