(ETFdb) Stocks continue to drift sideways with an upward bias as cautious optimism surrounding the looming “fiscal cliff” has proven to be a dominant theme on Wall Street. Choppy trading has become the norm as mixed data releases have kept a lid on confidence, including lackluster ISM and factory orders data coupled with upbeat construction spending and weekly jobless claims. Amid the uncertain landscape, industry veteran PowerShares has debuted a “hands off” exchange-traded fund that may provide a refuge from rampant volatility, offering exposure to the S&P 500 Index with a twist.
The PowerShares S&P 500 Downside Hedged Portfolio (PHDG) is designed to offer investors broad equity market exposure along with an implied volatility hedge. This new ETF uses a quantitative, rules-based methodology to dynamically allocate its notional investments among three components: equity, volatility and cash.
This new addition to the PowerShares lineup is intriguing, but far from unique. Investors can choose from a handful of exchange-traded products that give them the flexibility to access the popular S&P 500 Index in different ways.
In fact, PHDG follows a similar index as the Barclays S&P Dynamic VEQTOR ETN (VQT), which tracks the S&P 500 Dynamic VEQTOR Total Return Index. However, this competitor charges 0.95% in expense fees versus PHDG’s price tag of only 0.39% [see also Finding The Best S&P 500 ETF].
PowerShares already offers the most popular S&P 500 ETF with a twist––the S&P 500 Low Volatility Portfolio (SPLV) has amassed an impressive $3 billion in assets under management since launching in mid-2011. This fund selects 100 stocks with the lowest realized volatility over the past year from the broad index. Other ETFs with a unique take on the well-known S&P benchmark include:
▪ Direxion S&P 500 Volatility Response Shares (VSPY): This ETF uses a quantitative strategy to shift exposure between the S&P 500 and cash depending on volatility conditions.
▪ PowerShares S&P 500 High Beta Portfolio (SPHB): This fund holds 100 stocks from the S&P 500 that are deemed to have the highest sensitivity to market movements over the past year.
▪ PowerShares S&P Value Line Timeless Select Portfolio (SPHQ): This fund selects stocks from the S&P 500 that are deemed to have strong long-term growth and stable earnings.
▪ UBS E-TRACS S&P 500 Gold Hedged Index (SPGH): This ETN is split 50/50 between long positions in the S&P 500 Index and gold futures contracts.
▪ Morgan Stanley S&P 500 Crude Oil Linked ETN (BARL): This ETN is split 50/50 between S&P Index futures and an equal-weighted combination of WTI and Brent Crude Oil futures contracts.