Three new ETFs focus on corporate fundamentals
TORONTO, April 14, 2015 /CNW/ - This year marks the 25th anniversary of the listing of the first exchange-traded fund (ETF). In the midst of the nostalgia, it might be time to consider the problem at the heart of many popular ETFs: market-capitalization weighting.
Because market-capitalization-weighted indices focus on a single factor – the total value of a company's outstanding shares – they tend to be overweight in companies that are overvalued, underweight in those that are undervalued and incorporate market speculation.
There may be a smarter way to invest.
PowerShares Canada today announced the listing of three new smart beta ETFs on the Toronto Stock Exchange (TSX). All three ETFs have now closed the initial offerings of units and will be available for trading on TSX when the market opens today.
The new ETFs each employ the FTSE RAFI Fundamental Index® strategy, which selects and weights constituents in the index based on four fundamental measures of size: the five-year averages for sales, cash flow and dividends, as well as current book value.
"The strategy looks beyond the simplistic cap-weighted index to assess the true economic size of each company and weight it accordingly," says Jamie Kingston, Senior Vice President, Product Management and Development, Invesco Canada. "By breaking the link between price and portfolio weight, fundamental index strategies do not allow the market to dictate the weight a stock receives in an index."
"We are thrilled to continue our longstanding relationship with PowerShares Canada and congratulate them on the launch of their three new ETFs that track our indices," said Jacqueline O'Flanagan, managing director of Canada for FTSE Group. "It's great to see the steady growth of smart beta ETFs in the Canadian market."
"PowerShares Canada has been a great partner in not just making these ideas available to Canadian investors through ETFs, but in educating investors on their merits," said Jason Hsu, vice chairman of Research Affiliates. "The Fundamental Index approach is a great way to access any equity market using less expensive, more transparent strategies. It's wonderful to see it continue to gather momentum worldwide."
PowerShares FTSE RAFI Canadian Small-Mid Fundamental Index ETF (PZC) is the first Canada-listed fundamental index ETF to provide exposure to Canadian small- and mid-cap companies.
PZC seeks to replicate, before fees and expenses, the performance of the FTSE RAFI® Canada Mid-Small Index. PZC invests, directly or indirectly, primarily in Canadian equity securities of small- and medium-sized companies.
The FTSE RAFI® Canada Mid-Small Index is comprised of the constituents from the FTSE Canada All Cap Index that are not constituents of the FTSE RAFI Canada 100 Index.
PowerShares FTSE RAFI U.S. Fundamental Index ETF (PXS) seeks to replicate, before fees and expenses, the performance of the FTSE RAFI® US 1000 Index. PXS invests, directly or indirectly, primarily in U.S. equity securities.
The FTSE RAFI® US 1000 Index is comprised of the 1,000 U.S. companies with the largest fundamental value that are included in the FTSE US All Cap Index. This strategy is also available for purchase in U.S. dollars, listed on TSX as PXS.U.
PowerShares FTSE RAFI Global+ Fundamental Index ETF (PXG) seeks to replicate, before fees and expenses, the performance of the FTSE RAFI® All World 3000 Index. PXG invests, directly or indirectly, primarily in companies with the highest fundamental weightings from across both developed and emerging markets globally.
The FTSE RAFI® All World 3000 Index is comprised of 3,000 developed- and emerging-market companies with the largest fundamental value that are included in the FTSE Global All Cap Index. This strategy is also available for purchase in U.S. dollars, listed on TSX as PXG.U.
The new ETFs complement PowerShares Canada's existing suite of Fundamental Indexing ETFs and mutual funds, which includes:
- PowerShares FTSE RAFI Canadian Fundamental Index ETF (PXC)
- PowerShares FTSE RAFI U.S. Fundamental (CAD Hedged) Index ETF (PXU)
- PowerShares FTSE RAFI® Canadian Fundamental Index Class
- PowerShares FTSE RAFI® Emerging Markets Fundamental Class
- PowerShares FTSE RAFI® Global+ Fundamental Fund
- PowerShares FTSE RAFI® U.S. Fundamental Fund
The FTSE RAFI Index Series was launched by FTSE in association with Research Affiliates as part of FTSE's range of non-market-capitalization-weighted indices.
To learn more about PowerShares Canada's smart beta ETFs and funds, visit www.powershares.ca, or connect with Invesco Canada on Twitter (@InvescoCanada), LinkedIn or Facebook.
About Invesco Canada Ltd.
Invesco Canada Ltd., operating under three distinct yet complementary product brands (Trimark, Invesco and PowerShares), is one of Canada's leading investment management companies. A subsidiary of Invesco Ltd., Invesco Canada's singular focus is on investment management, offering a diversified suite of solutions to institutions, organizations, companies and individual investors across Canada and around the world. Additional information is available at www.invesco.ca.
About Invesco Ltd.
Invesco Ltd. is a leading independent global investment management firm, dedicated to helping investors worldwide achieve their financial objectives. By delivering the combined power of our distinctive investment management capabilities, Invesco provides a wide range of investment strategies and vehicles to our clients around the world. Operating in more than 20 countries, the firm is listed on the New York Stock Exchange under the symbol IVZ. Additional information is available at www.invesco.com.
FTSE® is a trade mark owned by the London Stock Exchange Group companies and is used by FTSE International Limited ("FTSE") under licence. The FTSE RAFI® Index Series is calculated by FTSE in conjunction with Research Affiliates LLC ("RA"). Neither FTSE nor RA sponsor, endorse or promote this product and are not in any way connected to it and do not accept any liability in relation to its issue, operation and trading. Any intellectual property rights in the index values and constituent list vests in FTSE.
Investors should be aware of the risks associated with data sources and quantitative processes used in our investment management process. Errors may exist in data acquired from third-party vendors, the construction of model portfolios, and in coding related to the index and portfolio construction process. While Research Affiliates takes steps to identify data and process errors so as to minimize the potential impact of such errors on index and portfolio performance, we cannot guarantee that such errors will not occur.
"Fundamental Index®" and/or "Research Affiliates Fundamental Index®" and/or "RAFI®" and/or all other RA trademarks, trade names, patented and patent-pending concepts are the exclusive property of Research Affiliates, LLC.
Commissions, management fees and expenses may all be associated with investments in mutual funds and exchange-traded funds (ETFs). Trailing commissions may be associated with investments in mutual funds. Mutual funds and ETFs are not guaranteed, their values change frequently and past performance may not be repeated. There are risks involved with investing in ETFs and mutual funds. Please read the prospectus before investing. Copies are available from Invesco Canada Ltd. at www.powershares.ca.
There are risks involved with investing in ETFs. Please read the prospectus for a complete description of risks relevant to the ETF. Ordinary brokerage commissions apply to purchases and sales of ETF units.
Most PowerShares ETFs seek to replicate, before fees and expenses, the performance of the applicable index, and are not actively managed. This means that the sub-advisor will not attempt to take defensive positions in declining markets and the ETF will continue to provide exposure to each of the securities in the index regardless of whether the financial condition of one or more issuers of securities in the index deteriorates. In contrast, if a PowerShares ETF is actively managed, then the sub-advisor has discretion to adjust that PowerShares ETF's holdings in accordance with the ETF's investment objectives and strategies.
ETFs are not diversified investments.
PowerShares Canada is registered business name of Invesco Canada Ltd.
This piece was produced by Invesco Canada Ltd.
Invesco® and all associated trademarks are trademarks of Invesco Holding Company Limited, used under licence. PowerShares®, Leading the Intelligent ETF Revolution® and all associated trademarks are trademarks of Invesco PowerShares Capital Management LLC (Invesco PowerShares), used under licence.
© Invesco Canada Ltd., 2015
SOURCE Invesco Canada Ltd.
For further information: Aysha Mawani, Vice President, Corporate Affairs, Tel: 416.324.7712, [email protected]