Invesco PowerShares, a leading global provider of exchange-traded funds (ETFs), is to launch an ETF providing exposure to a portfolio of international companies with a history of stock buybacks.
The PowerShares International BuyBack Achievers Portfolio (IPKW) will invest in international companies that have effected a net reduction of 5% or more of their outstanding shares in the past 12 months.
The PowerShares International BuyBack Achievers Portfolio (IPKW) will be listed on the Nasdaq stock market and is scheduled to make its debut on February 27, 2014.
It will be linked to the Nasdaq International BuyBack Achievers Index, an index composed of international companies that have effected a net reduction of 5% or more of their outstanding shares in the past 12 months.
Stock buybacks are a form of payout to shareholders via the periodic repurchase of outstanding shares in the open market. The intended benefit is to accrete shareholder value by reducing the number of outstanding shares.
Various studies have suggested that companies which embark on stock buyback programmes have shown statistically significant outperformance. One possible reason for this is that a board’s authorization of a buyback reflects the asymmetric information between company insiders and shareholders, and thus signals a potential undervaluation of the company.
Lorraine Wang, global head of ETF products and research at Invesco PowerShares, said: “Our US-focused flagship, the PowerShares BuyBack Achievers Portfolio (PKW) has achieved a competitive long-term track record demonstrating the investment merit of the BuyBack Achievers methodology, and more broadly of smart beta. The PowerShares International BuyBack Achievers Portfolio (IPKW) expands the range of tools investors can use to efficiently allocate the BuyBack Achievers strategy across the globe.”
The Nasdaq International BuyBack Achievers Index, which is part of the Nasdaq Dividend Income Index Family, is a float modified market capitalization weighted index of non US stocks. In addition to meeting the 5% buyback rule, constituents must have a minimum three month average daily traded volume of $1 million and a minimum market capitalization of $250 million at the time of review.
The fund will have expense ratio of 0.55%.