Invesco's (NYSE:IVZ) PowerShares, the fourth-largest U.S. ETF issuer, announced Tuesday the PowerShares Fundamental suite of ETFs recently passed the $5 billion assets under management, underscoring the rising popularity of ETFs that use alternative methodologies to weighting by market capitalization.
"Invesco PowerShares has been focused on providing investors with the broadest and most diverse family of smart beta' ETFs since the firm was founded," said Andrew Schlossberg, head of global ETFs. "Invesco PowerShares pioneered Fundamentals Weighted ETFs introducing the first broad-based US 1000 portfolio back in 2005, followed by international portfolios in 2007, and the first fixed-income portfolio in 2010."
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PowerShares lists fundamentally-weighted ETFs in the U.S., Canada and Europe. Those funds are based on the Research Affiliates Fundamental Index methodology that includes the use of book value, cash flow, sales and dividends, to select and weight index members.
Alternative weighting methodologies have proven increasingly popular with investors with non-market cap-weighted ETFs accounting for 42 percent of inflows to equity-based ETFs through the first four months of this year, according to BlackRock.
More importantly, some of the PowerShares RAFI ETFs have outpaced their cap-weighted rivals. For example, the PowerShares FTSE RAFI US 1000 Portfolio (NYSE:PRF) is up 15.2 percent year-to-date compared to a 12.4 percent gain for the iShares Russell 1000 Index Fund (NYSE:IWB). PRF, which debuted in late 2005, has over $2 billion in assets.
The $646.7 million PowerShares FTSE RAFI US 1500 Small-Mid Portfolio (NASDAQ:PRFZ) has outperformed assorted small- and mid-cap ETFs this year with a gain of 17.3 percent. PRF and PRFZ are considered the flagship funds in the PowerShares RAFI suite.
PRF and PRFZ "have established five-year and since inception track records that demonstrated their effectiveness over varying market cycles. We believe the PowerShares Fundamental ETFs provide investors an important alternative to passive cap-weighted strategies, and also represent great value compared to actively managed portfolios when relative performance and fees are considered," said John Feyerer, head of product strategy & research at Invesco PowerShares, in a statement.
Other popular ETFs in the suite include the PowerShares FTSE RAFI Emerging Markets Portfolio (NYSE:PXH), which has nearly $323 million in AUM, and the PowerShares FTSE RAFI Developed Markets ex-U.S. Portfolio (NYSE:PXF). PXF has $543.3 million in AUM.
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