Inside PowerShares’ New Multi-Asset ETF

By | March 24, 2016

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The recent market upheaval triggered by global growth worries left investors baffled about which investment to tap. While equities have lost their appeal this year, fixed income securities have gained. In the equities spectrum, dividend stocks beat out other equity securities. Meanwhile, some country ETFs outperformed. With uncertainties likely to be in place in the coming days, investors can choose strategies that can reduce risk in their portfolio. And a multi-asset portfolio does a great job in accomplishing this goal. By investing in multi-asset ETFs, investors do not have to worry about the threats emanating from single-asset class picking. This is why PowerShares has rolled out a multi-asset ETF, PowerShares DWA Tactical Multi-Asset Income Portfolio (NASDAQ: DWIN ), which follows a ‘fund of funds’ approach. DWIN in Focus The new ETF looks to track the Dorsey Wright Multi-Asset Income Index. The index chooses investments from a cluster of income strategies on the basis of parameters like relative strength and current yield. The product holds five ETFs in the basket. The ETF will charge investors 69 basis points a year for this exposure. The Fund and the Index are primed for monthly rebalancing. PowerShares High Yield Equity Dividend Achievers Portfolio (NYSEARCA: PEY ), PowerShares Preferred Portfolio (NYSEARCA: PGX ), PowerShares Build America Bond Portfolio (NYSEARCA: BAB ), PowerShares Emerging Markets Sovereign Debt Portfolio (NYSEARCA: PCY ) and PowerShares Global Short Term High Yield Bond Portfolio (NYSEARCA: PGHY ) constitute the fund at the current level with weights of 20.88%, 20.81%, 20.35%, 18.99% and 18.97%, respectively (read: 4 Multi-Asset ETFs to Lower Portfolio Risk ). How This Fits in a Portfolio? DWIN could be an interesting choice for those seeking a broad income play. The fund offers mixed exposure ranging from equities to bonds to the alternative assets. Multi asset ETFs are funds that invest in a combination of diverse asset classes such as investment grade and high yield bonds, domestic and international markets stocks, preferred stocks, REITs and MLPs. These funds offer great diversification benefits by investing across different asset classes and provide a high level of current income with stability and potential for long-term appreciation. In the present low-yield environment, a look at high-income products seems feasible. By investing in diverse asset classes which have low correlations with conventional asset classes, the fund will likely reduce volatility and offer stability to the portfolio. Moreover, a fund-of-funds approach seems a great strategy in minimizing the portfolio risks. Can it Succeed? There is still a desire for such securities despite a good number of choices already in the space. So, the fund has scope for growth in this field (see all the Zacks ETF Categories here ). Still, the fund could face competition from Arrow Dow Jones Global Yield ETF (NYSEARCA: GYLD ), which has amassed over $89 million in assets. It costs investors 75 bps in annual fees. Among others, the popular multi-asset income ETFs – Guggenheim Multi-Asset Income ETF (NYSEARCA: CVY ), iShares Morningstar Multi-Asset Income ETF (BATS: IYLD ) and SPDR SSgA Income Allocation ETF (NYSEARCA: INKM ) – may also give stiff competition to the newbie. Notably, CVY, IYLD and INKM charge 65 bps, 60 bps and 70 bps in fees, respectively. Since the newly-launched fund charges in line with its peers, only a sizable yield can draw investors’ interest. Original Post Scalper1 News

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