Invesco PowerShares’ suite of ‘DWA Technical Leaders’ exchange-traded funds (ETFs) saw assets grow by 50% in 2012, passing through the $1 billion milestone. Asset growth was driven by a combination of inflows and strong performance.
Tom Dorsey, President of Dorsey, Wright & Associates.
The NYSE Arca-listed ETFs, which are based on the Dorsey Wright & Associates (DWA) relative strength index methodology, were among the first factor-driven ETFs available in the US marketplace.
Ben Fulton, Invesco PowerShares managing director of Global ETFs, said: “Dorsey Wright is one of the foremost experts in Relative Strength strategies, which are well-suited for the ETF structure. Asset growth for the PowerShares DWA Technical Leaders ETFs accelerated in 2012, and having achieved such a positive performance track record, we would expect that trend to continue.”
Tom Dorsey, President of Dorsey, Wright & Associates, added: “It was a big deal when Dorsey Wright and Invesco PowerShares introduced the Technical Leaders ETFs beginning in 2007; it really gave investors a new way to implement relative strength strategies. We believe that money managers will increasingly seek out well-designed alpha-seeking investments like the PowerShares DWA Technical Leaders ETFs that have demonstrated the potential to improve portfolio performance.”
The DWA relative strength index methodology is essentially a price momentum strategy that takes into account the performance of each of individual stock in the benchmark as compared to the benchmark itself. Stocks with high relative strength scores (strong momentum) are overweighted, while those with low relative strength scores (weak momentum) are underweighted.
This type of strategy can perform strongly during constant market environments, but can become unstuck at major inflection points, when technical regimes change. For example, the largest of the PowerShares DWA funds, the PowerShares DWA Technical Leaders Portfolio ETF (PDP), returned 17.87% last year compared to 16.00% for the S&P 500 Index. The ETF has also performed strongly over the past three years, producing an annualised return of 14.93% pa compared to 10.86% pa for the S&P 500. However, when markets became unglued in 2008, the fund lost 47.7% compared to 41.0% for the S&P 500.
PowerShares DWA Technical Leaders Strategies:
PowerShares DWA Technical Leaders Portfolio ETF (PDP)
PowerShares DWA Emerging Markets Technical Leaders Portfolio ETF (PIE)
PowerShares DWA Developed Markets Technical Leaders Portfolio ETF (PIZ)
PowerShares DWA SmallCap Technical Leaders Portfolio ETF (DWAS)