Market Overview

The Right Buyback ETF This Year

The Right Buyback ETF This Year

The PowerShares Buyback Achievers Fund (ETF) (NYSE: PKW) will turn 10 in December, but PKW is not just one of the oldest exchange-traded funds dedicated to companies spending oodles of cash on repurchasing their own shares. PKW is also the king of the group with $1.62 billion in assets under management.

PKW's combined heft and popularity make it easy for the ETF to overshadow its international counterpart, the PowerShares International BuyBack Achievers Portfolio (PowerShares Exchange-Traded Fund Trust II (NYSE: IPKW)). IPKW recently celebrated its second anniversary and now has $84.4 million in assets under management.

How Successful Are Buyback ETFs?

S&P 500 companies remain enthused by their own shares. In the fourth quarter, measured as November through January, share repurchases rose 5.2 percent to $136.6 billion on a year-over-year basis, according to FactSet. The research firm notes that last year, there were 70 activist-driven buyback campaigns, the highest total in a decade.

Related Link: The Benefits Of A Buyback ETF

Other developed markets are embracing the buyback game as well, highlighted by IPKW's better than 7 percent year-to-date gain. Said another way, PKW overshadows its international cousin in size and heft, but PKW is done on the year, meaning IPKW is winning where it really matters: total returns.

What Makes IPKW Unique

“IPKW is much newer to the marketplace than its cousin PKW, having debuted in February of 2014 as compared to PKW’s launch in late 2006. Trading volume is not huge on a daily basis in this fund (approximately 33,000 shares traded daily), but this is to be expected given the “niche” nature of the fund and the fact that it is a little more than two years old at this point in time. IPKW tracks an index known as the NASDAQ International BuyBack Achievers Index and invests in ordinary shares in companies that are domiciled outside of the U.S.,” said StreetOne Financial Vice President Paul Weisbruch in a note out Wednesday.

Followers of international shareholder rewards trends will not be surprised to see Japan as IPKW's largest geographic at nearly 29 percent. In recent years, Asia's second-largest economy has started to shed some of its tight-fisted reputation, deploying more cash for use on buybacks and dividends. Canada and the U.K. combine for over 26 percent of the ETF's weight.

Like PKW, IPKW has a significant consumer discretionary weight. In this case, that sector is nearly a third of the ETF's weight. However, IPKW's technology weight of just 1.3 percent could be a surprise to investors familiar with U.S. buyback ETFs because that sector is one of the largest buyers of its own shares in the U.S. Industrials and financial services names combine for nearly 36 percent of IPKW's sector weight.


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