Investors Ditch Smaller and Newer ETFs

Exchange traded funds, which have experienced explosive growth, are showing signs of zero population growth. Invesco PowerShares(IVZ) plans to eliminate 19 ETFs this month.

"After carefully evaluating numerous factors including shareholder considerations, length of time on the market, asset levels and the potential for future growth, we proposed closing certain portfolios that have not gained sufficient acceptance with investors," said Bruce Bond, chief executive officer of Invesco PowerShares.

Investor interest in ETFs has been concentrated on the largest, and oldest, funds. The smallest half of the group has accounted for no more than 0.5% to 1% of the total daily average dollar volume of transactions. Groups of ETFs have been disappearing in recent months, many with relatively narrow areas of investment focus.

Many of the doomed ETFs, listed below, track "RAFI" indexes, created by Robert Arnott, chairman of Research Affiliates. While most popular indexes are weighted by the market value of companies, Arnott's "fundamentally weighted" gauges use factors such as sales, cash flow, book value and dividends. Critics of RAFI note that the portfolios have produced mediocre returns.

Invesco said shareholders of record of the ETFs on the close of business on May 18 will receive cash equal to the amount of the net asset value of their shares as of May 22, which will include capital gains and dividends. Shareholders will recognize a capital gain or loss equal to the amount received for their shares.

PowerShares ETFs Marked for Elimination NAME & TICKER TheStreet.com RATINGS GRADE 1-MO. TOTAL RET'N (%) YR.-TO-DATE TOTAL RET'N (%) 12-MO. TOTAL RET'N (%) APRIL AVG. DAILY DOLLAR VOL. ($000) PowerShares Dynamic Aggressive Growth Portfolio (PGZ) D+ 3.63 -6.22 -38.33 81 PowerShares Dynamic Asia Pacific Opportunities Portfolio (PUA) E+ 18.96 12.45 -43.21 105 PowerShares Dynamic Deep Value Portfolio (PVM) C- 17.48 -5.19 -29.03 89 PowerShares Dynamic Europe Portfolio (PEH) E+ 21.01 2.20 -51.58 17 PowerShares Dynamic Hardware & Consumer Electronics Port. (PHW) D+ 18.36 7.07 -37.39 8 PowerShares FTSE RAFI Asia Pacific ex-Japan Small-Mid Port. (PDQ) E 19.02 15.35 -45.04 58 PowerShares FTSE RAFI Basic Materials Sector Portfolio (PRFM) E+ 37.46 22.45 -41.98 227 PowerShares FTSE RAFI Consumer Goods Sector Portfolio (PRFG) C- 24.50 8.17 -28.41 39 PowerShares FTSE RAFI Consumer Services Sector Portfolio (PRFS) C 24.93 14.61 -21.13 178 PowerShares FTSE RAFI Energy Sector Portfolio (PRFE) C- 9.09 -3.17 -39.10 3,172 PowerShares FTSE RAFI Europe Small Mid Portfolio (PWD) E 24.18 15.27 -46.37 21 PowerShares FTSE RAFI Financials Sector Portfolio (PRFF) D 24.59 -13.55 -57.95 156 PowerShares FTSE RAFI Health Care Sector Portfolio (PRFH) C 3.50 -6.03 -19.15 151 PowerShares FTSE RAFI Industrials Sector Portfolio (PRFN) E+ 23.77 -1.10 -38.74 249 PowerShares FTSE RAFI International Real Estate Portfolio (PRY) E 23.06 3.33 -51.84 27 PowerShares FTSE RAFI Telecom & Technology Sector Port. (PRFQ) C 12.25 11.47 -25.35 169 PowerShares FTSE RAFI Utilities Sector Portfolio (PRFU) C 2.54 -8.99 -29.05 134 PowerShares High Growth Div Achiever Portfolio (PHJ) C 10.58 -7.77 -39.10 94 PowerShares International Listed Private Equity (PFP) E 19.73 -1.95 -58.51 103 Median April Dollar Volume of All ETFs 306 Source: TheStreet.com Ratings & Bloomberg (Data as of 3/31/2009). For an explanation of our ratings, click here..

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