PowerShares Debuts ETF of ETFs

May 23, 2008

SAN DIEGO (ETFguide.com) -  Fund of fund solutions have been a hit with mutual funds and now they’re poised to become a hit with exchange-traded funds (ETFs).

Invesco PowerShares has introduced three ETFs that primarily own other ETFs. The funds have been dubbed “Autonomic” by the company because they employ an automatic asset allocation investment strategy.

The funds are the PowerShares Autonomic Balanced NFA Global Asset Portfolio (PCA), the PowerShares Autonomic Balanced Growth NFA Global Asset Portfolio (PAO), and the PowerShares Autonomic Growth NFA Global Asset Portfolio (PTO).

The funds employ a patented strategy called “Resampled Efficiency” optimization which was developed by New Frontier Advisors.

“The PowerShares Autonomic ETFs bring state-of-the-art institutional quality asset management tools that are designed to maximize core investment management and long-term objectives to advisors and investors, including demonstrably improved portfolio optimization and rebalancing,” said Dr. Richard Michaud, President and CIO of New Frontier Advisors.

The new series of ETFs mainly hold PowerShares ETFs, but also own ETFs managed by other companies like Barclays Global Investors (iShares), State Street Global Advisors and the Vanguard Group.

PCA contains 27 ETF holdings and all but 10 of the funds are PowerShares ETFs.

Where do ETFs of ETFs fit into a person’s overall portfolio strategy?

Kirk Kinder, CFP with Picket Fence Financial in Bel Air, MD says, “These one stop shop funds are a positive development for retail investors who would not get objective portfolio advice or would get stuck in an overpriced annuity with a commissioned broker.”

Kinder concludes, “That said, I still think people are better served by developing a personalized 

portfolio tailored to their needs and risk tolerance, whether that is through an advisor or on their own.”

The Autonomic ETFs will charge annual expense ratios of 0.25 percent, which doesn’t include the additional cost of the underlying funds. PowerShares estimates the additional cost to be an additional half percent, but will vary over time.

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