ActiveETFs | InFocus

Date Launched: April 11, 2008

Links: Website, Factsheet, Prospectus

Investment Strategy: (PQY: 24.40 0.00%) is an actively managed ETF that invests at least 95% of its assets in 50 Nasdaq-listed securities based on a methodology which involves rating companies with market caps greater than $500 million and ranking them using AER’s proprietary “NOW” ranking system based on earnings growth, valuations and money flow. The portfolio managers than narrow their universe down to the 100 largest Nasdaq-listed Global Market Securities and then go on to hold 50 of those stocks. The goal of the fund is to achieve long-term capital appreciation and outperform the Nasdaq 100 Index.

Portfolio Managers:

David O’Leary, AER Advisors Inc. – Mr. O’Leary has served as Chairman and Chief Executive Officer of Alpha Equity Research for the past 14 years, as well as the Chairman and Chief Investment Officer of AER Advisors. David has been in the investment business for more than 35 years.

The Numbers:

Expense Ratio – 0.75%

Average Bid-Ask Ratio – 0.24%

Average Volume – 2,087 shares

What’s special about it?

1. Was one of the 4 Active ETFs launched by PowerShares on April 11, 2008 that were the first Active ETFs on the market, that still live on. (The VERY first launch was by Bear Stearns but that fund went down with the company)

2. In essence, PQY is a quant-driven equity fund and the portfolio decisions made by the managers are dependent on the factors that go into the “NOW” model. The fund tries to remain equally-weighted and hold 2% in each stock and rebalances when a position exceeds 3%.

3. While AER performs the ranking methodology process on a weekly basis, the advisors have discretion on when they can perform trades or how frequently they want to refresh the model.

4. You can expect ETF returns to stick very closely to those of the Nasdaq 100 Index as the correlation between the two is 0.95.

Analysis:

Positives –

- If you believe in quantitative strategies, then this is good choice as the fund basically follows quantitative screens.

- Following its strategy, PQY sticks largely to mid-large cap names, with more than 80% of the fund allocated to large-cap growth and mid-cap growth stocks.

Negatives –

- The market cap of PQY after being in existence for around 22 months is still only $4.36 million which is paltry to say the least. The lack of investor interest after being on the market for so long is definitely a negative and if it continues, PowerShares may well have to pull PQY off the market. The low daily traded volume doesn’t help it’s cause.

- Restricting the investment universe to Nasdaq-listed securities will limit the spectrum of opportunities available to the portfolio managers as they exclude stocks trading on other markets.

- Investing in individual stocks does bring stock-specific risk into play, though holding a portfolio of 50 stocks should reduce that risk significantly.

Performance since inception vs Nasdaq 100:

Disclosure: No positions in above-mentioned names
 
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