A New Muti-Asset ETF Of ETFs

The ETF of ETFs structure is increasingly popular and with interest rates still low, multi-asset exchage traded funds could regain some luster with income investors. So the PowerShares DWA Tactical Multi-Asset Income Portfolio 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 DWTR, one of the most successful new ETFs to come market last year.

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.

Like DWTR, DWIN is comprised of five other PowerShares ETFs. Holdings in the new multi-asset ETF are as follows: The PowerShares Preferred Portfolio PGX, PowerShares Build America Bond Portfolio BAB, PowerShares High Yield Equity Dividend Achievers Portfolio PEY, PowerShares Global Short Term High Yield Bond Portfolio PGHY and the PowerShares Emerging Markets Sovereign Debt Portfolio 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.