PowerShares's new ETF mitigates risk with VIX Index futures, equities

By Toni Weeks

San Diego, Jan. 13 - PowerShares Actively Managed Exchange-Traded Fund Trust announced in an N-1A filing with the Securities and Exchange Commission plans to launch the PowerShares Equity Allocation Portfolio.

The fund will be an actively managed exchange-traded fund that seeks to achieve positive total returns in rising or falling markets that are not directly correlated to broad equity or fixed-income market returns.

The fund will use a quantitative rules-based strategy designed to provide returns that correspond to the performance of a benchmark, which has not yet been selected, and will invest in a combination of equity securities, VIX index-related instruments and money market instruments. The benchmark will aim to mitigate risk through the dynamic allocation between equity securities and short-term futures contracts and will provide broad equity market exposure with an implied volatility hedge by allocating exposure between a volatility component, equity securities and cash.

The volatility component will utilize the price of the two near-term VIX index futures months, replicating a position that rolls the nearest month futures to the next month futures on a daily basis in equal fractional amounts. Under normal circumstances, the VIX Index futures allocation constitutes 2.5% to 40% of the benchmark, with equity securities comprising the remainder.

Peter Hubbard, Brian McGreal and Joshua Betts will be the portfolio managers.

Shareholder fees, management fees and other expenses have not yet been determined.

Wheaton, Ill.-based Invesco PowerShares Captial Management LLC will serve as the fund's investment adviser.

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