A smoother path to US equity income?

Transcription

1 A smoother path to US equity income? Introducing the benefits of low volatility dividend strategies and the new PowerShares S&P 500 High Dividend Low Volatility UCITS ETF June 2015 This document is directed at Professional Clients and Financial Advisers in Austria, France, Germany, Italy and the Netherlands and Qualified Investors in Switzerland and is not for consumer use.

2 The PowerShares S&P 500 High Dividend Low Volatility UCITS ETF aims to achieve a considered balance between dividend yield and volatility. In October 2012, S&P Dow Jones Indices launched the S&P 500 Low Volatility High Dividend Index, a unique rulesbased dividend strategy index designed to deliver high dividend yield and low return volatility in a single index. The index uses a simple two-step screening process to incorporate not only high dividend yield, but also the well-known low-volatility strategy. Indices that employ the low-volatility strategy have tended to outperform their benchmark on a risk-adjusted basis historically. (Source: S&P Dow Jones Indices).

3 A smoother path to US equity income? In the current climate of low interest rates, dividend paying stocks have become an increasingly attractive option in the search for income. However increased exposure to dividend paying stocks often introduces unwanted levels of volatility to a portfolio. The PowerShares S&P 500 High Dividend Low Volatility UCITS ETF aims to achieve a considered balance between dividend yield and volatility by providing exposure to 50 of the highest yielding companies within the S&P 500 Index, while meeting clearly specified diversification, volatility and tradability requirements. The unique combination of two single factor strategies income and volatility in a transparent, cost effective ETF wrapper provides investors with the performance potential of US equity exposure while seeking to reduce the volatility inherent in equity income investment. Why consider the PowerShares S&P 500 High Dividend Low Volatility UCITS ETF? Potential for meaningful contribution to a diversified income stream Historically observed low correlation to bond risk in rising rate environment 1 Index methodology designed for lower volatility than traditional dividend strategies 1 Source: Bloomberg L.P., Weekly Correlation. 02 A smoother path to US equity income?

4 A dividend-yield weighted index The S&P 500 Low Volatility High Dividend Index incorporates a selection and weighting methodology that seeks to enhance income with lower volatility. Figure 1 Index construction The screening and methodology The index is weighted by trailing 12-month dividend yield 1, with constituents being reweighted semi-annually in January and July 2 Universe: S&P 500 Index The top 75 stocks with the highest dividend yield are selected 3 75 Highest Dividend Yield Stocks The top 50 securities with the lowest realised volatility form the index 4 50 Lowest Volatility Stocks At each rebalancing, modifications are made to stock weights to ensure diversification across individual stocks and sectors S&P 500 Low Volatility High Dividend Index Index constituent weight constrained between 0.05% and 3.0% Weight of each GICS sector capped at 25%. Refer to the definition of GICS sectors in footnote 3. 1 Rebalancing reference date for the data used in the review is the last business date of the prior ember and June, respectively. 2 Effective after the close of the last business day in January and June. 3 With the number of stocks from each GICS sector capped at 10. If the number of stock from a sector reaches 10, the remaining highest yielding stock from other sectors are selected until the number of selected stock reaches 75. Global Industry Classification Standard (GICS). The GICS structure consists of 10 sectors, 24 industry groups, 67 industries and 156 subindustries into which S&P has categorized all major public companies. 4 Realised volatility is defined as the standard deviation of the security s daily prices returns over the prior 252 trading days. Source: S&P Down Jones Indices LLC, Invesco PowerShares. Figure 2 (%) Compared risk characteristics (volatility) Standard deviation calculated on total returns using monthly values Annualised risk Annualised risk-adjusted returns Standard deviation 3 years 5 years 10 years 3 years 5 years 10 years S&P 500 Low Volatility High Dividend Index S&P 500 Index Past and backtested performance is not a guide to future returns. For more information on backtesting please see Figure 4. Source: S&P Dow Jones Indices, March All information presented prior to the index launch date ( ) is backtested. The S&P 500 Low Volatility High Dividend Index features a lower standard deviation compared to the broad market index (as shown in figure 2 above). However, investors should take notice that this low volatility characteristic is not guaranteed and not strictly comparable to an index that solely screens constituents based on historical volatility. In the case of the S&P 500 Low Volatility High Dividend Index, the volatility screening is applied as the second filter to a preselected universe of stocks (the primary screening is trailing 12 month dividend yield). An index methodology designed to provide a lower level of volatility than found in more traditional dividend strategies. For more information about the Index, please refer to S&P Dow Jones Indices research papers Is the low volatility anomaly universal?, April 2015 The beauty of simplicity: The S&P 500 Low Volatility High Dividend Index, May 2015 Index factsheet, as at end of April A smoother path to US equity income?

5 High dividend and low volatility single factor strategies combined to deliver unique performance potential When looking at high dividend and low volatility strategies on a standalone basis, each index has demonstrated outperformance potential compared to the broader S&P 500 index over various time periods. S&P 500 Low Volatility High Dividend Index captured the tailwind of both factors S&P 500 Low Volatility High Dividend Index combines the High Dividend and Low Volatility factors into a single package. Figure 3 illustrates how the High Dividend and Low Volatility combination has historically delivered robust performance relative to the each of the factors in isolation. Figure 3 S&P 500 Low Volatility High Dividend Index Methodology The benefits of combining two factors S&P 500 Total Return Index S&P High Yield Dividend Aristocrats Total Return Index S&P 500 Low Volatility Total Return Index S&P 500 High Dividend Low Volatility Total Return Index 1 Year 3 Year (Annualised) 5 Year (Annualised) (%) Past and backtested performance is not a guide to future returns. For more information on backtesting please see Figure 4. Source: Bloomberg L.P. As at 31 January All Index performances are Net Total Return, in US Dollars, and all information presented prior to the index launch date ( ) is backtested. Figure 4 S&P 500 Low Volatility High Dividend Index (Back-tested and actual) Performance since S&P 500 High Dividend Low Volatility Net Total Return Index S&P 500 Net Total Return Index Down Capture 1 June March 2009 Total return (%) Index (annualised) S&P 500 Low Volatility High Dividend Net Total Return Index S&P 500 Net Total Return Index Up Capture 6 March January Total return (%) Index (annualised) S&P 500 Low Volatility High Dividend Net Total Return Index 50 S&P 500 Net Total Return Index Past and backtested performance is not a guide to future returns. Source: Bloomberg L.P., Investors cannot invest in an index directly. The S&P 500 Low Volatility High Dividend Index returns represent backtested performance for the period 7 ember 1999 to 16 September 2012 and actual performance from 17 September 2012, based on rules used in the creation of the index. Backtested performance does not represent actual performance and should not be interpreted as an indication of such performance; it is provided for illustration purposes only. Backtested performance has certain inherent limitations. For example, it ignores certain factors such as the trade timing, security liquidity and the fact that economic and market conditions in the future may differ significantly from those of the past. Accordingly, backtested performance is not a guide or indicator of future returns. 04 A smoother path to US equity income?

6 PowerShares S&P500 High Dividend Low Volatility UCITS ETF Index S&P 500 Low Volatility High Dividend Net Total Return Index ETF inception 11 May 2015 Listing Borsa Italiana, Deutsche Börse XETRA, Euronext Paris, London Stock Exchange, SIX Swiss Exchange (also registered for distribution in Austria and in the Netherlands) Ongoing charges 0.30% p.a. 1 Some eligibility criteria All S&P 500 Index constituents are ranked in descending order of trailing 12 months dividend yields. The top 75 stocks are selected and the number of stock per GICS sector is capped at 10. The 50 lowest realised volatility stocks are selected and weighted by dividend yield (each constituent is capped at 3% and each GICS sectors is capped at 25%) Tickers HDLV ( trading line on Borsa Italiana, Deutsche Börse, Euronext; US$ trading line on LSE, SIX Swiss Exchange) HDLG ( trading line on LSE) ISIN IE00BWTN6Y99 1 The ongoing charges figure is based on annualised expenses. It excludes portfolio transaction costs. Why Invesco PowerShares? Intelligent indexing - Invesco PowerShares offers a selection of Exchange Traded Funds (ETFs) that track next generation indices: Indices that go beyond merely tracking a particular market. We select indices that attempt to outperform markets through intelligent security selection and weighting. Liquid solutions - Invesco PowerShares was founded in the US in 2003 on a vision of delivering investment performance through ETFs whose shares can be bought and sold on any business day. We are building solutions that offer investors liquidity, transparency, and provide access to targeted markets. Invesco standards - Invesco PowerShares is a global ETF leader managing assets in excess of US$100bn 2 and acting diligently in its clients interests. We are part of Invesco Ltd., an independent global investment management firm dedicated to helping people worldwide build their financial security. Best Smart Beta ETF Provider 2 Source: Invesco, as at end of March A smoother path to US equity income?

7 A dividend yield weighted index

8 Contact information Michael Huber Business Development Director Germany & Austria +49 (0) Jean-Baptiste Lavollay Business Development - France +33 (0) jb.lavollay@invescopowershares.com Thibaud de Cherisey European ETF Development Director +33 (0) thibaud.decherisey@invescopowershares.com Kris Walesby Capital Markets - PowerShares (EMEA) +44 (0) kris.walesby@invescopowershares.com info@invescopowershares.net Telephone calls may be recorded. Any reference to a ranking, a rating or an award provides no guarantee for future performance results and is not constant over time. Risk warnings The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested. Past and backtested performance is not a guide to future returns. In tracking the Index, the ETF may be concentrated from time to time in a small number of sectors. ETF investors should be prepared to accept a higher degree of risk than for an ETF that is more widely diversified across different sectors. Important information This document is directed at Professional Clients and Financial Advisers in Austria, France, Germany, Italy and the Netherlands and Qualified Investors in Switzerland and is not for consumer use. This Fund is domiciled in Ireland. Where Invesco Powershares has expressed views and opinions, these may change. The distribution and the offering of the ETF in certain jurisdictions may be restricted by law. Persons into whose possession this document may come are required to inform themselves about and to comply with any relevant restrictions. This does not constitute an offer or solicitation by anyone in any jurisdiction in which such an offer is not authorised or to any person to who it is unlawful to make such an offer or solicitation. Persons interested in acquiring the ETF should inform themselves as to (i) the legal requirements in the countries of their nationality, residence, ordinary residence or domicile: (ii) any foreign exchange controls: and (iii) tax consequences which might be relevant. Restricted Investors The ETF s shares are neither registered for public distribution, nor listed on any exchange, in jurisdictions in Continental Europe other than Austria, France, Germany, Italy, the Netherlands and Switzerland. As a consequence, this ETF s shares may not be offered or distributed by way of public advertisement or public offer in jurisdictions in Continental Europe other than Austria, France, Germany, Italy, the Netherlands and Switzerland. The ETF s shares may only be offered and the Key Investor Information Document, Prospectus and marketing materials on the ETF may only be distributed in jurisdictions in Continental Europe, without public solicitation and in compliance with the private placement rules or equivalent exemption set forth in the laws, rules and regulations of the jurisdictions concerned. Any resale of the ETF in these countries may only be made in accordance with the relevant applicable laws governing the sale and offering of financial products. Where securities are mentioned in this document they do not necessarily represent a specific portfolio holding and do not constitute a recommendation to purchase, hold or sell. Any investment in an ETF should be made on the basis of the relevant Prospectus and Key Investor Information Documents, including consideration of the investment objective, risks, charges and expenses. Further information on the ETF, including the Prospectus, Key Investor Information Documents and Supplements available at from your financial adviser or broker. This document is intended for information purposes in regard to the existence and potential benefits of investing in an ETF. However, it is not intended to provide specific investment advice including, without limitation, investment, financial, legal, accounting or tax advice, or to make any recommendations about the suitability of an ETF for the circumstances of any particular investor. You should take appropriate advice as to any securities, taxation or other legislation affecting you prior to investment. The S&P 500 Low Volatility High Dividend Index is a product of S&P Dow Jones Indices LLC or its affiliates ( SPDJI ) and has been licensed for use by Invesco PowerShares. Standard & Poor s and S&P are registered trademarks of Standard & Poor s Financial Services LLC ( S&P ); Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC ( Dow Jones ); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Invesco PowerShares. The PowerShares S&P 500 High Dividend Low Volatility UCITS ETF is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500 Low Volatility High Dividend Index. This document is issued in Austria by Invesco Asset Management Österreich GmbH, Rotenturmstrasse 16 18, 1010 Wien, in France by Invesco Asset Management S.A., 18, rue de Londres, Paris, authorised and regulated by the Autorité des marchés financiers in France, in Germany by Invesco Asset Management Deutschland GmbH, An der Welle 5, Frankfurt/M., regulated by Bundesanstalt für Finanzdienstleistungsaufsicht, in Italy by Invesco Asset Management SA Sede Secondaria, Piazza del Duomo, 22 Galeria Pattari, 2, Milano, in the Netherlands by Invesco Asset Management SA Dutch Branch, J.C. Geesinkweg 999, 1114 AB Amsterdam, and in Switzerland by Invesco Asset Management (Schweiz) AG. Subscriptions of shares are only accepted on the basis of the most up to date legal offering documents. The legal offering documents (fund & share class specific Key Investor Information Document, prospectus, annual & semi-annual reports, articles and trustee deed) are available free of charge on our website and local language from the representative for the funds distributed in Switzerland, Invesco Asset Management (Schweiz) AG, Talacker 34, CH-8001 Zurich. Paying agent for the funds distributed in Switzerland: BNP PARIBAS SECURITIES SERVICES, Paris, succursale de Zurich, Selnaustrasse 16, CH-8002 Zurich /PDF/ CE1165