Market Overview

Signs Of A Return To A High Beta ETF

Signs Of A Return To A High Beta ETF

Regarding volatility exchange-traded funds, it is those of the low volatility variety that are garnering all the attention this year. That includes the ultra-popular PowerShares S&P 500 Low Volatility Portfolio (PowerShares Exchange-Traded Fund Trust II (NYSE: SPLV)).

Amid all the fervor over ETFs like SPLV, lost in that shuffle are high beta equivalents such as the PowerShares S&P 500 High Beta Portfolio (PowerShares Exchange-Traded Fund Trust II (NYSE: SPHB)). However, some signs point to investors renewing their attention in the likes of SPHB.

The Case For SPHB

Quiet as it has been kept, SPHB is actually outperforming SPLV this year. Year-to-date, the high beta ETF is up 9.7 percent compared to 8.3 percent for SPLV. However, SPLV is, not surprisingly, the better risk-adjusted bet. To this point in the year, SPHB's annualized volatility works out to over 28 percent compared to less than 12 percent for SPLV, according to ETF Replay data.

SPHB, which turned five in May, tracks the S&P 500 High Beta Index. That index is essentially the opposite of SPLV's underlying index. SPHB's benchmark holds the 100 S&P 500 stocks with the “highest sensitivity to market movements, or beta, over the past 12 months,” according to PowerShares.

Related Link: Fidelity Makes A Splash With 6 Smart Beta ETFs

What is interesting is that SPHB's largest sector weight is financial services at almost 34 percent. Interesting because that same sector is also over 18 percent of SPLV's weight. Combine that with its 28.3 percent weight to energy stocks, and SPHB almost looks like a value ETF because those are usually the two largest sector allocations in traditional value funds.

Technology and consumer discretionary names combine for over 21 percent of SPHB's weight. Those sectors have scant representation in SPLV.

Data suggest investors are returning to SPHB. Over the past month, the ETF has added nearly $131 million in new assets, a total exceeded by just two other PowerShares ETF over that period, according to issuer data.

Making that recent influx of new money into SPHB all the more impressive is that it represents a significant percentage of the ETF's current assets under management tally. As of September 16, the ETF had $223.6 million in assets under management.

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