SAN DIEGO (ETFguide.com) - A late November registration filing with the Securities and Exchange Commission (SEC) by PowerShares Capital Management could mean that actively managed exchange-traded funds (ETFs) are close to being born.

 

The filing is for the following four ETFs:

--PowerShares Active AlphaQ Fund
--PowerShares Active Alpha Multi-Cap Fund
--PowerShares Active Mega-Cap Portfolio
--PowerShares Active Low Duration Portfolio

 

The AlphaQ and Alpha Multi-Cap Fund will each own fifty stocks, equally weighted. The AlphaQ selects fifty screened Nasdaq stocks, while the Alpha Multi-Cap focuses on fifty screened U.S. large cap stocks.

 

The Mega-Cap Fund will screen fifty U.S. mega-cap stocks and the Low Duration Portfolio is a bond fund that aims to outperform the Lehman Brothers 1-3 Year US Treasury Index.
 

Stocks for the equity funds are selected based on a quantitative selection methodology called “NOW” ranking, developed by AER Advisors, a New Hampshire-based investment researcher. The systems combines aspects of stock money flow with traditional security analysis.

 

The newly titled Active ETFs calls to mind PowerShares existing lineup of Dynamic ETFs, which are based on Intellidex indexes managed by the American Stock Exchange. Interestingly, both fund lineups use proprietary quantitative ranking systems for selecting securities. One difference is that the methodology for determining the final score is more transparent for the AER driven portfolios.

The most surprising part of the PowerShares filing is that the funds aren't constrained to follow any particular benchmark. This is different because the performance of all other ETFs are tied to a specific index. The SEC has been very strict about making fund managers disclose the index they're tracking and separately calculating the value of the index from the fund.

 

Other details revealed by the filing is that portfolio holdings for the Active ETFs will be disclosed daily at the fund’s website and that last business day of each week the fund manager will be able to make up to three trades.

 

Information about ticker symbols and expense ratios for the PowerShares Active ETFs have not yet been released.