Analyzing PowerShares’ Effort in Smart Investing

PRF fundamental investment approach

The PowerShares FTSE RAFI US 1000 Portfolio (PRF) tracks the investment results of the FTSE RAFI US 1000 Index. The index selects stocks based on four fundamental measures—book value, cash flow, sales, and dividends. PRF, as defined by its investment objective, invests almost 90% of its net assets in the portfolio. PRF invests in a huge number of securities. As of August 17, 2015, it’s invested in 1,007 securities. Currently, it manages a net asset of 4.56 billion. It’s mainly invested in the finance, information technology, and consumer discretionary sectors.

Analyzing PowerShares’ Effort in Smart Investing

Top five holdings represent a major part of PRF

PRF’s top five holdings include ExxonMobil (XOM), JPMorgon Chase (JPM), AT&T (T), General Electric (GE), and Chevron (CVX). They account for almost 10% of its portfolio. It has a low expense ratio of 0.39%. Since its inception on December 19, 2005, the fund has given a return of 8.87%. That’s higher than its benchmark’s return of 7.79%.

SPLV has a large universe of low volatility stocks

A similar smart beta is the PowerShares S&P 500 Low Volatility ETF (SPLV). It’s based on the S&P 500 Low Volatility Index. The index chooses its components of 100 stocks from the S&P 500 (SPY). The stocks have exhibited low volatility in their price fluctuation over the past 12 months. The fund also follows a concentration policy that technically allows it to invest more than 25% of its net assets in a single industry or sector. Currently, it’s managing a portfolio of $4.91 billion. The fund has given an annual return of 7.42% with an expense ratio of 0.25%.