As the exchange-traded fund industry grows, fund issuers have developed creative new ways to maximize the returns of passive strategies. While non-traditional funds like Direxion Daily Financial Bull 3X Shares ( FAS) and United States Natural Gas ( UNG) have gained popularity among many investors willing to take on the risk, companies like RevenueShares, WisdomTree and PowerShares are seeking to put a new twist on traditional investing. Shunning the popular market-cap weighting strategy employed by ETF giants like iShares and State Street ( STT), RevenueShares and WisdomTree are looking to increase investor returns through strategies that weight factors like dividends, earnings and revenue. PowerShares offers a line of "Dynamic" ETF products that allocate assets using a combination of performance data. In the last decade, cap weighting may have been king, but new breeds of funds have arrived. This article will be the first in a series that examines the alternative strategies to increase awareness of the growing ETF market.
RevenueShares applies a revenue-weighting strategy to traditionally cap-weighted indexes. By allocating assets by revenue, this firm seeks to "reduce the erosion of investor returns created by cap-weighting's tendency to overweight outlier firms in the index whose stock prices have been elevated to levels beyond the company's actual growth rate and also the tendency of cap-weighted indexes to underweight stocks that are experiencing cyclical setbacks." RevenueShares currently has six ETF products: RevenueShares Large Cap Fund ( RWL ), RevenueShares Mid Cap Fund ( RWK), RevenueShares Small Cap Fund ( RWJ), RevenueShares Financial Sector Fund ( RWW), RevenueShares ADR Fund ( RTR) and RevenueShares Navellier Overall A-100 Fund ( RVW). The "core index" ETFs of RWL, RWK and RWJ are rebalanced annually while the specialty indexes are rebalanced quarterly.