By Eric Dutram of ETF Database

Although the ETF world started by focusing on tracking well known indices such as the S&P 500, it has significantly branched out in recent years, offering funds that track everything from commodity indices to quantitative methodologies that attempt to deliver excess returns.

These quant ETFs haven't really hit it big yet, but they have certainly attracted a fair amount of assets from investors who believe in the benefits of stock analysis but are eager to reap the benefits of the ETF structure.

One interesting marriage is found in the PowerShares DWA Technical Leaders Portfolio ( PDP), a fund that offers access to a strategy of buying and selling securities based on chart patterns and other technical indicators such as relative strength levels.

Investors who emphasize relative strength believe that stocks that show high relative strength compared with broader indexes are likely to continue increasing in price, and that it is better to buy those stocks than to buy stocks with falling prices. In other words, " Prices are never too high to begin buying or too low to begin selling," , according to Jessie Livermore.

Relative strength investing is a relatively simple strategy, but there is ongoing debate about how the strength should be calculated and the effectiveness of such a strategy in an era when markets are more efficient than ever.

PDP tracks the Dorsey Wright Technical Leaders Index, which includes approximately 100 U.S.-listed companies that demonstrate powerful relative strength characteristics. The index is constructed pursuant to Dorsey Wright's proprietary methodology, which takes into account the performance of each of the 3,000 largest U.S.-listed companies as compared to a benchmark index, and the relative performance of industry sectors and subsectors.

Dorsey Wright believes that relative strength is a "very robust and adaptable stock selection method." Furthermore, the firm states that its process for selecting stocks in the portfolio is "systematic" and not influenced by what the firm thinks should be included in or excluded from the portfolio.

PDP's portfolio uses a modified equal weighting methodology that assigns more weight to securities with better relative strength characteristics. The fund rebalances quarterly and produces a relatively high level of turnover; currently it stands at 87%.

Due to this high level of turnover, the holdings could vary significantly from one period to the next; one quarter's leaders could be the next quarter's laggards, which could lead to the securities' exclusion from the fund.

Currently, the fund is heavy in consumer discretionary firms (which make up 20% of the total assets). Another 20% goes to industrial firms, while information technology firms constitute 18%. Some of the top holdings include Apple ( AAPL) (3.5%), American Tower ( AMT) (3.45%) and Ventas ( VTR) (3.4%).

PDP is largely slanted towards mid-cap firms, which constitute close to 70% of the fund's total assets. PDP has done very well in 2010, posting a gain of 10% (by comparison, SPDR S&P Mid-Cap 400 ( MDY) is up about 9%). The fund is also up close to 60% over the past year, and charges an expense ratio of 0.60%.

For a more detailed discussion of relative strength, see this article.

For more ETF news, make sure to sign up for our free ETF newsletter.