The Guggenheim offering comprises nine sectors that, as of Friday, were weighted between 10.69 percent and 11.56 percent of the portfolio. On the other hand, sector weights in the PowerShares fund ranged from 9.15 percent to 12.89 percent, and that didn’t include a tenth sector for telecommunications services.
O’Keeffe noted that telecom services is folded into the utilities sector within Russell’s classification system.
“It’s really the difference in the classification system,” John Feyerer, vice president of ETF product management at InvescoPowerShares, said about the seeming discrepancies. He notes PowerShares uses the Global Industry Classification Standard, or GICS, a commonly used system developed by Standard & Poor’s and MSCI. So while the EQAL fund replicates the Russell index that’s based upon nine global sectors, its sector allocations are displayed slightly different on the PowerShares website because it reports all of its funds using the GICS methodology.
“My guess on what’s happening is there are some subtle differences at the subsector or industry classification levels where there are some small differences in terms of how they’re categorized between the GICS and Russell systems,” Feyerer says.
He adds that despite those seeming differences, the bottom line is that the EQAL fund is replicating Russell’s sector-based equal-weighting methodology.
At the granular level of individual holdings, both the PowerShares and Guggenheim funds essentially mirror each other in terms of top 10 holdings, give or take an exception or two based on slight differences in portfolio weighting.
As for the one-month delay between EQAL’s inception and today’s official introduction to the world, Feyerer explains that InvescoPowerShares wanted to launch the fund by year-end so it could have a full-year track record starting with 2015 rather than waiting until 2016. But launching it two days before Christmas is a surefire way to get lost in the shuffle, so it waited until early this year before formally getting the word out and promoting the fund.
After its first month of trading, the PowerShares ETF has about $2.5 million in assets.
For its part, Guggenheim wouldn’t comment directly about the new PowerShares fund. “Guggenheim pioneered the equal-weight space, and we’re constantly looking for ways to enhance our ETF product line for the benefit of advisors and investors,” says company spokesman Ivy McLemore.