PowerShares Becomes Latest Competitor In Plain Vanilla Fee War
Invesco Ltd.'s (NYSE:IVZ) PowerShares unit is the fourth-largest U.S. issuer of exchange-traded funds. PowerShares had over $130.1 billion in ETF assets under management. While the cap-weighted PowerShares QQQ (NASDAQ:QQQ), the Nasdaq-100 tracking ETF, is the largest PowerShares fund, the issuer is one of the pioneers of the smart beta movement.
Knowing that PowerShares is one of the dominant names in the smart beta space, it may surprise some industry observers to learn that the issuer recently made a big push into plain vanilla, traditional ETFs, but that is exactly what happened last week.
Under is newly minted PureBeta brand, PowerShares introduced five new, traditional ETFs last week. While the new PowerShares ETFs face entrenched competition, the fees on these new ETFs are among the lowest in their respective categories, indicating the new PowerShares offerings could gain traction among cost-conscious advisors and investors.
U.S. Equity Offerings
Two of the new PowerShares ETFs focus on U.S. stocks, the PowerShares PureBetaSM MSCI USA Portfolio (BATS: PBUS) and the PowerShares PureBetaSM MSCI USA Small Cap Portfolio (BATS: PBSM).
PBUS tracks the cap-weighted MSCI USA Index. That new ETF holds 631 stocks and allocates over 23 percent of its weight to the technology sector. Financial services and health care names combine for almost 29 percent of that new ETF's weight. PBUS charges 0.04 percent per year, or $4 on a $10,000 investment, making it one of the more cost-effective broad market ETFs available.
PBSM, the new small-cap offering, follows the MSCI USA Small Cap Index and holds over 1,800 stocks. PBSM charges just 0.06 percent per year, or $6 on a $10,000 investment, making it one of the least expensive small-cap ETFs on the market.
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Cheap International Funds
Investors are flocking to inexpensive international equity ETFs this year. That could benefit the new PowerShares PureBetaSM FTSE Developed ex-North America Portfolio (BATS: PBDM). PBDM charges a mere 0.07 percent annually, putting it in the sweet spot of low-cost ex-US developed markets ETFs.
PowerShares expands its emerging markets lineup with the PowerShares PureBetaSM FTSE Emerging Markets Portfolio (BATS: PBEE). PBEE, which tracks the FTSE Emerging Index, charges 0.14 percent per year. That puts the new ETF into immediate competition with some existing emerging markets ETFs with the same expense ratio.
The new ETF holds almost 860 stocks and devotes 42 percent of its combined weight to China and Taiwan.
Inexpensive Bond Fund
The PowerShares PureBetaSM 0-5 Yr US TIPS Portfolio (BATS: PBTP) follows the BofA Merrill Lynch 0-5 Year US Inflation-Linked Treasury Index. That benchmark holds holds Treasury Inflation Protected Securities (TIPS) with maturities of up to five years.
PBTP has an annual fee of 0.07 percent per year, or $7 on a $10,000 investment.
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