Market Overview

Investors Are Flocking To This New ETF

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With 2015 almost in the books, avid followers of the exchange traded funds industry now know that over 200 new exchange traded products have come to market this year. That is just in the US and the flow of rookie ETFs has not abated simply because it is December.

This is also the time to evaluate what has worked and what has not among this year's crop of new ETFs. Some of this year's most successful new ETFs are backed by big Wall Street brands, others are tied to star investors while others have found success the old fashioned way. The old fashioned way be simply offering a concept that is immediately appealing to advisors and investors.

The PowerShares DWA Tactical Sector Rotation Portfolio (NASDAQ: DWTR) fits into the latter category, though it is fair to attribute to some of DWTR's rapid success to good timing. Through its emphasis on relative strength, there is an element of momentum in DWTER, which has helped the new ETF thrive in a year in which the momentum and growth factors have been sturdy.

DWTR tracks the Dorsey Wright Sector 4 Index, which "is designed to gain exposure to the strongest relative strength sectors in the US through the universe of nine PowerShares DWA sector Momentum ETFs," according to PowerShares.

In plain English, that means DWTR is an ETF of ETFs, and the funds held by the new ETF are other PowerShares ETFs that follow Dorsey Wright indices. That also means DWTR is likely to be compared to the popular First Trust Dorsey Wright Focus 5 ETF (NASDAQ: FV). However, there are significant differences between DWTR and FV.

Notably, FV holds five First Trust ETFs while DWTR holds four PowerShares ETFs. Second, DWTR's relative strength component is rebalanced weekly while FV's rebalance is conducted on a monthly basis.

Although DWTR appears to be the more concentrated play by virtue of it holding one less ETF than FV, the PowerShares offering has some advantages. For example, FV has been vulnerable to biotech swoons because it owns a dedicated biotech ETF and another healthcare sector ETF that has heavy biotech exposure. DWTR's healthcare exposure is limited to its 25.3 percent weight to the PowerShares DWA Healthcare Momentum Portfolio (NYSE: PTH).

DWTR's largest holding is an allocation is a 28.2 percent weight to the PowerShares DWA Consumer Staples Momentum Portfolio (NYSE: PSL), which is this year's best-performing consumer staples ETF.

At least for the start of 2016, DWTR's success hinges on the success of the growth factor as nearly 70 percent is allocated to large-, mid- and small-cap growth stocks.

Though some market observers are forecasting a big year for low volatility stocks and ETFs in 2016, investors are not shying away from DWTR. The ETF has $127.2 million in assets under management, making it one of the most successful new ETFs of 2015. And of that $127.2 million in AUM, nearly $19 million has arrived in just the past week, a total exceeded by just one other PowerShares ETF over that period, according to issuer data.

Posted-In: Long Ideas News Sector ETFs Broad U.S. Equity ETFs New ETFs Trading Ideas ETFs

 

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