Invesco PowerShares Capital Management lis iquidating 19 exchange-traded funds (ETFs) within its family, some tied to the FTSE RAFI indices.
Among the ETFs being liquidated are 12 funds that follow FTSE RAFI indices. Each of these funds selects stocks with a passive strategy and weights each of the stock index components based upon various fundamental measures such as earnings and price-to-book valuations. This type of methodology is known as “fundamental indexing.” The concept for these particular funds never struck a chord with investors.
“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,” says Bruce Bond, president and CEO of Invesco PowerShares. “We remain fully committed to the ETF industry and expect to offer new, exciting products in the months ahead.”
At the end of March, the PowerShares product lineup had $25.8 billion invested in a total of 135 ETFs. With around $12.3 billion in assets, the PowerShares QQQ Trust (QQQQ) represents roughly half of all ETF assets at the PowerShares. Other successful products within the company’s lineup include the PowerShares WilderHill Clean Energy Portfolio (PBW), which has around $540 million in assets and the PowerShares Dynamic Market Portfolio (PWC), which has $252 million.
In early May 2009, the funds began the process of closing down and liquidating their respective portfolios. This process will cause each Fund’s holdings to deviate from the securities included in its underlying index and each Fund to increase its cash holdings, which may lead to increased tracking error. Effective May 19, the funds are closed to new investors.
Shareholders were able to sell their holdings prior to May 19, 2009, and may incur typical transaction fees from their broker-dealer. Shareholders of record on the close of business on May 18, 2009 will receive cash equal to the amount of the net asset value of their shares as of May 22, 2009, which will include any capital gains and dividends, in the cash portion of their brokerage accounts. Shareholders will generally recognize a capital gain or loss equal to the amount received for their shares over their adjusted basis in such shares.
The final day of trading for the ETFs was May 18.
–PowerShares Dynamic Aggressive Growth Portfolio (PGZ)
–PowerShares Dynamic Asia Pacific Portfolio (PUA)
–PowerShares Dynamic Deep Value Portfolio (PVM)
–PowerShares Dynamic Europe Portfolio (PEH)
–PowerShares Dynamic Hardware & Consumer Elec Portfolio (PHW)
–PowerShares FTSE RAFI Asia Pacific ex-Japan Small-Mid Portfolio (PDQ)
–PowerShares FTSE RAFI Basic Materials (PRFM)
–PowerShares FTSE RAFI Consumer Goods (PRFG)
–PowerShares FTSE RAFI Consumer Services ( PRFS)
–PowerShares FTSE RAFI Energy (PRFE)
–PowerShares FTSE RAFI Europe Small-Mid (PWD)
–PowerShares FTSE RAFI Financials (PRFF)
–PowerShares FTSE RAFI Health Care (PRFH)
–PowerShares FTSE RAFI Industrials (PRFN)
–PowerShares FTSE RAFI Telecom & Tech (PRFQ)
–PowerShares FTSE RAFI Utilities (PRFU)
–PowerShares High Growth Rate Dividend (PHJ)
–PowerShares International Listed Private Equity (PFP)
Ron DeLegge is the San Diego-based publisher and editor of ETFguide.com is a frequent speaker and radio host on index investing. He also has been an investment and financial advisor and holds the Series 65 and 63 licenses.