Advances in the marketplace are also coming from some lesser-known companies. PowerShares is muscling its way into the industry with plans to roll out 24 ETFs over the next several months. That's on top of two brought to market earlier this month — one investing in an index of U.S. companies that draw most of their revenue from China, and the other hitched to a benchmark of dividend-paying stocks.
The company's other two ETFs, the Dynamic Market Portfolio and the Dynamic OTC Portfolio, were introduced in May 2003. A total of about $335 million is invested in PowerShares' four ETFs. Most of its client base is made up of brokers and advisers, but it is starting to receive more calls from institutions, said Bruce Bond, chief executive officer.
"A year and a half ago, when we launched our first funds, no one had heard of PowerShares. Today, advisers are aware of their value," Mr. Bond said.
PowerShares are based on enhanced indexes that seek to provide "market outperformance or exposure to unique market segments," Bond said.
Some of the PowerShares are based on the company's "Intellidex" methodology, developed by AMEX, which identifies the stocks with the greatest investment merit and then selects the top issues for the index.
Six of its 24 new ETFs will be based on the Style Intellidex indexes, Mr. Bond said. The other funds are based on indexes created by ValueLine, New York City, and Zacks Investment Research, Chicago, as well as WilderShares LLC, San Diego.
The remainder will comprise industry and sector-type products, which will also be based on new Intellidex indexes consisting of the 30 stocks with the greatest investment merit within each market segment. PowerShares registered all of the offerings with the SEC in July.
"These have all been in registration for a little while, and we are seeing tremendous interest from sophisticated advisors, so our first move is to get these out and move forward," Mr. Bond said.
Yet before newly proposed ETFs are released to the public, they face significant regulatory hurdles. There are a number of technical challenges to overcome in structuring the product, such as pricing issues. And for every technical challenge, there usually is an equivalent regulatory obstacle.