Launched on 09/27/2007, the PowerShares FTSE RAFI Developed Markets ex-U.S. Small-Mid Portfolio (PDN - Free Report) is a smart beta exchange traded fund offering broad exposure to the Broad Developed World ETFs category of the U.S. equity market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
Because the fund has amassed over $250.56 M, this makes it one of the average sized ETFs in the Broad Developed World ETFs. PDN is managed by Invesco Powershares. Before fees and expenses, PDN seeks to match the performance of the FTSE RAFI Developed Markets ex-U.S. Mid-Small 1500 Index.
This Index is designed to track the performance of the small and medium capitalization companies domiciled in developed markets with the highest ranking cumulative score, selected from the constituents of the FTSE Developed ex US All Cap Index. The securities are selected and weighted based on the following four fundamental measures of firm size: book value, cash flow, sales and dividends.
Cost & Other Expenses
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Annual operating expenses for this ETF are 0.49%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 2.49%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Looking at individual holdings, Tgs Nopec Geophysical Co Asa (TGS - Free Report) accounts for about 0.18% of total assets, followed by Gvc Holdings Plc (GVC LN) and Meg Energy Corp .
PDN's top 10 holdings account for about 1.65% of its total assets under management.
Performance and Risk
So far this year, the ETF has gained about 0.57%, and was up about 17.56% in the last one year (as of 05/02/2018). PDN has traded between $30.20 and $36.59 in the past 52-week period.
PDN has a beta of 0.82 and standard deviation of 13.75% for the trailing three-year period, which makes the fund a low choice in the space. With about 1511 holdings, it effectively diversifies company-specific risk.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.