Invesco PowerShares has launched five ETFs that offer investors focused exposure to factor investing in the European equity market. Investors can choose between Value, Quality, Low beta, Price momentum and Earnings momentum.
The new ETFs track the Solactive Tradable European Factor indices, which are derived from a universe of 675 stocks. Each index is created by selecting the 50 stocks with the greatest exposure to the respective factor. Liquidity and tradability of the underlying stocks are taken into account to reduce concentration risk, while the indices are rebalanced monthly.
The new products are PowerShares Tradable European Value Factor UCITS ETF; PowerShares Tradable European Quality Factor UCITS ETF; PowerShares Tradable European Low Beta Factor UCITS ETF; PowerShares Tradable European Price Momentum Factor UCITS ETF and PowerShares Tradable European Earnings Momentum Factor UCITS ETF.
Chris Mellor, Equity Product Specialist at Invesco PowerShares, says: “First of all, factors are nothing new. Academics have been researching them for decades to explain stock performance. What’s become evident more recently is the way investors are using them to enhance performance or hedge risk in their portfolios.
“Each of these factors has outperformed the broad equity market over the longer term but individual performance can vary significantly in the short term. This provides investors with an opportunity to capture additional performance if they are able to adjust exposure at the appropriate times.
“We expect these new ETFs to attract a variety of investors who want to pursue factors from either a tactical or a strategic perspective. For example, hedge funds are likely to use them in the same way as our sector ETFs, providing them with an easy way to capture or adjust exposure to a specific part of the market for hedging purposes.”
Invesco PowerShares has substantial experience in ETFs that are optimised for their tradability, having launched a broad range of optimised ETFs in 2009 based on STOXX Europe 600 supersectors. The company has EUR25.4 billion in total assets under management in Europe, with more than EUR3.3 billion of this in its range of European and US sector ETFs.
Mellor concludes: “Our new factor ETFs build on our sector pedigree and are the latest examples of how we’re trying to help our investors build better portfolios.”
The new factor ETFs are available in EUR on Xetra, with an ongoing charge of 0.30 per cent per annum.