PKW Invesco BuyBack Achievers ETF Trust

Thanks to higher dividend tax rates and a lack of other good investing options, companies are continuing to pour money into share buybacks. This corporate tool helps to boost EPS, and hopefully assists in further increasing the share price (due to the reduction in the supply of shares) as well.

The technique does have some merit too, as the PowerShares Buyback Achievers ETF (PKW), which follows companies that have bought back at least 5% of their outstanding stock over the past 12 months, has easily beaten out the market. In fact, over the past 12 months PKW has added over 33%, compared to a 21% gain for the S&P 500 in the same time frame, while the fund possesses over $2.6 billion AUM too (see Apple Stock Repurchases Puts Buyback ETF in Focus).

Due to this level of outperformance and the broad based interest from investors, it shouldn’t be too surprising to note that PowerShares has just added an international version of PKW. This new fund, the PowerShares International Buyback Achievers ETF, trades under the symbol of IPKW, and we have highlighted some of the key details below for investors looking to take a global approach to buybacks in their portfolios:

IPKW in Focus

This ETF looks to track the NASDAQ International BuyBack Achievers Index, a benchmark of common stocks of foreign companies that have seen a net reduction in shares outstanding of 5% or more in the latest fiscal year. The fund and index are reconstituted annually in July and rebalanced quarterly, while the product charges 55 basis points a year in fees for this exposure.

The portfolio only contains about 40 securities in its basket, though it does a solid job of spreading out assets. Financials (28.3%), consumer discretionary (15.7%), and consumer staples (14.4%) take the top three sector spots, leaving little for industrials and telecoms. Meanwhile, from a nation look, Japan (28.8%) and the UK (22.5%) dominate, though Denmark and Canada each take up more than 8% too.

This initial portfolio reading suggests that certain countries—thanks to tax and buyback rules—may dominate the portfolio. Additionally, some sectors might be more prone to this process than others, potentially leaving certain segments on the outside of this fund. Still, the method clearly has some data to back it up, especially given how well the domestic version of the fund has performed in recent trading (see 5 ETF Predictions for 2014).

“The buyback methodology is generally more tax-efficient relative to dividend payments and may provide investors enhanced total shareholder return,” said Lorraine Wang, Invesco PowerShares global head of ETF products and research in a press release. “The merits of the BuyBack Achievers methodology, and more broadly smart beta, are demonstrated in our US-focused flagship product PowerShares BuyBack Achievers (PKW), so we are excited to provide investors a way to participate in global opportunities as well.”

Bottom Line

IPKW is undoubtedly looking to cash in off of the incredible success that has been seen in the U.S.-focused buyback achievers ETF. Not only has PKW crushed the market, but it has also accumulated its fair share of assets in the process too (read Best ETF Strategies for 2014).

The real test for IPKW will be if a decent number of foreign companies engage in buybacks as the current portfolio is quite small compared to what we see in the U.S. market. However, if this doesn’t become a problem for this new ETF, the fund may become an interesting choice for investors seeking a fresh way to play international markets.  

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PWRSH-INT BB AP (IPKW): ETF Research Reports
 
PWRSH-BYBK ACHV (PKW): ETF Research Reports
 
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