Exchange traded fund (ETF) provider Invesco PowerShares Capital Management has launched the PowerShares DWA Tactical Multi-Asset Income Portfolio (DWIN). Dorsey, Wright & Associates (DWA) is a registered investment advisory firm based in Richmond, Virginia.
"Despite increased volatility in financial markets, we recognise that investors still expect better than average returns, which has become increasingly difficult for income investors looking for yield," says Dan Draper, Head of Invesco PowerShares. "This new multi-asset income solution helps investors navigate volatility using a sub-sector ETF rotation strategy covering a universe of seven income producing segments including treasuries."
The last 30 years have seen a strong bull market in fixed income, suppressing rates down to historically low levels. This phenomenon has caused investors to search for yield in a variety of untraditional asset classes including high yield, MLPs, and bank loans. While higher yields have been realised, investors also have realised an increase in volatility. A strategy that monitors these segments systematically may help mitigate some of this volatility while potentially maintaining higher income levels.
DWIN uses DWA's Relative Strength methodology, one of the most adaptive tools with regard to deciphering the strongest market trends versus weakest market trends. By its nature, relative strength tends to be longer term in scope, which can help reduce potential turnover, but also is adaptive enough to rotate a portfolio as the market dictates. The end result is a strategy that seeks to limit losses, while potentially profiting from upside trends. The Dorsey Wright Multi-Asset Income Index seeks to allocate between income producing strategies based on their proprietary relative strength methodology. Dorsey Wright's methodology incorporates relative performance to identify market trends which can ultimately be used to capitalise on performance differences between income segments.
"Dorsey Wright is excited to continue its long-standing and valued relationship with Invesco PowerShares with the launch of Dorsey Wright's first income-focused portfolio, the PowerShares DWA Tactical Multi-Asset Income Portfolio," says Tammy DeRosier, President of Dorsey, Wright & Associates. "This strategy is unique in its ability to pivot within a broad array of income funds toward areas that exhibit strong relative strength with an emphasis on income generation. We, along with PowerShares, continue to focus on bringing products to market that seek to meet the needs of our clients."
DWIN may be combined with other smart beta products or asset classes to create a strategic allocation. The ability to gain exposure to the strong income producing segments can be used as a complement to domestic or international equity holdings. Additionally, the portfolio can be used tactically in an effort to dial up or dial down risk. The treasury component is a natural mechanism for increasing and decreasing market exposure under varying market conditions