Invesco PowerShares adds two low beta ETFs to smart beta lineup

Nov 9th, 2015 | By | Category: Equities

Invesco PowerShares, a leading global provider of exchange-traded funds, has announced the launch of two new smart beta ETFs centred around low beta equity investing in the US and internationally.

Invesco PowerShares adds two low beta ETFs to smart beta lineup

Dan Draper, Managing Director, Global Head at Invesco PowerShares.

The PowerShares Russell 1000 Low Beta Equal Weight Portfolio (USLB) and PowerShares FTSE International Low Beta Equal Weight Portfolio (IDLB) follow a multi-factor strategy, that combines individual factors in an attempt to improve risk-adjusted returns over market capitalisation-weighted benchmarks. Their low correlation with market cap-weighted portfolios means these products can also provide useful diversification benefits.

“We’re excited to be rolling out two new low beta strategies,” said Dan Draper, Managing Director, Global Head, Invesco PowerShares. “Both ETFs have potential to reduce risk for investors by following disciplined index methodologies while offering exposure to risk-management factors.”

Low beta and low volatility investment strategies have seen an influx of assets in the years following the global financial crisis with investors attracted to both the reduced downside risk and the historical long-term outperformance of these stocks. Both strategies target stocks that have historically exhibited low levels of price variation; however, low beta strategies invest in stocks that have exhibited lower price movements relative to broad market movements. Low volatility strategies, in comparison, target stocks with low levels of absolute price fluctuations, with no reference to the broader market. This makes low beta strategies ideal for investors who benchmark against the broad market and want to follow a strategy which will drop less in the event of a downturn.

The funds are based on the FTSE Low Beta Equal Weight Index Series methodology which selects constituents based on their historical beta and their level of earnings. To be included in the index a constituent must have a beta of less than one, indicating that the constituent has historically risen less in up markets and fallen less in down markets. With regard to earnings, a constituent must have operated at a profit as measured by trailing 12 month earnings. The selected constituents will receive an equal weight in the index leading to a bias towards small- and mid-cap stocks when compared to broader market cap-weighted indices.

The funds have been listed on the Nasdaq and carry a total expense ratio of 0.35% and 0.45%.

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