The ETF of ETFs structure is increasingly popular and with interest rates still low, multi-asset exchange-traded funds could regain some luster with income investors. So the PowerShares DWA Tactical Multi-Asset Income Portfolio (NASDAQ: DWIN) could prove to be one of this year's more well timed ETF launches.
The PowerShares DWA Tactical Multi-Asset Income Portfolio, which debuted Wednesday, uses a similar approach to that of the PowerShares DWA Tactical Sector Rotation Portfolio (NASDAQ: DWTR), one of the most successful new ETFs to come market last year.
A Closer Look AT DWIN
DWIN follows the Dorsey Wright Multi-Asset Income Index. That index “invests its assets in the shares of other, underlying exchange-traded funds eligible for inclusion in the Index, rather than in securities of individual companies. The Index is designed to select investments from a universe of income strategies with the criteria for inclusion based on a combination of relative strength and current yield,” according to PowerShares.
Related Link: REIT ETFs Ready For Sector Status
Like DWTR, DWIN is comprised of five other PowerShares ETFs. Holdings in the new multi-asset ETF are as follows: The PowerShares Preferred Portfolio(ETF) (NYSE: PGX), PowerShares Build America Bond Portfolio (NYSE: BAB), PowerShares High Yld. Dividend Achv(ETF) (NYSE: PEY), PowerShares Global Short Term High Yield Bond Portfolio (NYSE: PGHY) and the PowerShares Emerging Markets Sovereign Debt Portfolio (NYSE: PCY).
“The last 30 years have seen a strong bull market in fixed income, suppressing rates down to historically low levels. This phenomenon has caused investors to search for yield in a variety of untraditional asset classes including high yield, MLPs, and bank loans. While higher yields have been realized, investors also have realized an increase in volatility. A strategy that monitors these segments systematically may help mitigate some of this volatility while potentially maintaining higher income levels,” said PowerShares in a statement.
Beyond common stocks, multi-asset ETFs can hold assets ranging from junk bonds to REITs to MLPs to preferred stocks. A lineup featuring assets like that not only helps investors generate income, but also reduces exposure to the intense correlations seen throughout equity markets.
In addition, non-investment grade bonds are viewed as less sensitive to interest rate increases, and dividends on preferred stocks are almost a sure bet, because a company that does not pay a previously agreed to dividend on a preferred issue risks harm to its credit rating. Investors enjoy the high yields and the close to guaranteed income offered by preferreds. However, preferred issues are vulnerable in a rising interest rate environment, and the reality is U.S. interest rates only have one way to go and it is not lower.
DWIN charges 0.69 percent per year, or $69 for every $10,000 invested.
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