After markets closed on Wednesday, Apple trounced expectations by reporting a 15% jump in its second-quarter earnings from a year earlier. That had to come as particularly good news for investors in the PowerShares QQQ (Nasdaq: QQQQ).

Why? Because due to the QQQ's unusual weighting methodology, Apple accounts for 12.6% of the fund's assets. For comparison, Microsoft makes up only 4.8% of the ETF, despite having a significantly larger market cap than Apple: $166 billion vs. $108 billion.

The market-cap oddities don't end there. Google counts for just 4.7% of the fund, despite having a market cap of $120 billion, almost identical to Apple. And Google's weight is just a shade above Gilead Sciences, a biotech company that accounts for 3.5% of the fund, despite having one-third of the market-cap of Google.

Confused?

The oddities trace back to the Nasdaq-100's methodology. The index is officially a "modified market-cap-weighted index." New companies entering the index are weighted essentially based on their market cap. But once they're in the index,

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Adviser is finding that hedging techniques can help reduce overall portfolio risk and volatility. At the same time, he's avoiding leveraged ETFs.

 

David Kreinces is a portfolio manager with ETF Portfolio Management. Before founding the Newbury Park, Calif.-based firm in 2007, he was a portfolio manager in Merrill Lynch's global private client group, specializing in absolute return strategies using exchange-traded funds.

Kreinces is one of a growing number of independent portfolio advisers offering all-ETF portfolios that implement hedging strategies.To find out more about his unique quantitative-based methodology, IndexUniverse.com's Managing Editor Murray Coleman recently caught up with him at ETF Portfolio Management's southern California headquarters.

 

IU.com: How do you implement ETFs in absolute return strategies?

Kreinces: Our strategies are built around quantitative, rules-based models. And they don't use leverage at all. That's an important point. By not using leverage, we feel like our ability to limit volatility and control portfolio risk

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Adviser also finds that hedging techniques can help reduce overall portfolio risk and volatility. At the same time, he's avoiding leveraged ETFs.

 

David Kreinces is a portfolio manager with ETF Portfolio Management. Before founding the Newbury Park, Calif.-based firm in 2007, he was a portfolio manager in Merrill Lynch's global private client group, specializing in absolute return strategies using exchange-traded funds.

Kreinces is one of a growing number of independent portfolio advisers offering all-ETF portfolios that implement hedging strategies.To find out more about his unique quantitative-based methodology, IndexUniverse.com's Managing Editor Murray Coleman recently caught up with him at ETF Portfolio Management's southern California headquarters.

 

IU.com: How do you implement ETFs in absolute return strategies?

Kreinces: Our strategies are built around quantitative, rules-based models. And they don't use leverage at all. That's an important point. By not using leverage, we feel like our ability to limit volatility and control portfolio risk

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Investors pulled nearly $6 billion out of exchange-traded funds in February, the first time ETF fund flows have been negative in nearly a year.

 

Investors pulled nearly $6 billion out of exchange-traded funds in February, the first time ETF fund flows have been negative in nearly a year.

The new data, compiled by the National Stock Exchange and published on Wednesday, reversed the strong trend seen in January 2009 and December 2008. That's when investors poured more than $80 billion into ETFs.

 

Month

ETF Fund Flows

Feb-09

(5,794)

Jan-09

41,989

Dec-08

42,841

Nov-08

26,375

Oct-08

7,303

Sep-08

57,662

Aug-08

11,336

Jul-08

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It wasn't just the usual suspects to whom the assets were flowing.

 

Net cash flow into exchange-traded funds in November blew away October levels, with more than $26.3 billion coming into ETFs, according to data from the National Stock Exchange.

In October, during the worst of the investor panic, net cash flow into ETFs was only $7.3 billion. There were 271 ETFs and 26 exchange-traded notes with net outflows in October, and 179 ETFs and 16 ETNs with outflows in November.

It wasn't just the usual suspects to whom the assets were flowing. While the iShares, SPDRs, Vanguard and ProShares had their usual big flows, most notable was the arrival of Direxion Funds as a serious competitor, which took in $511 million in net new cash in November.

Though ProShares itself did not slow down while its new competitor made its face known to the ETF world. ProShares took in $4.6

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November wasn't so bad for some of the biggest ETFs.

 

The picture was relatively bright for the performance of the ten-largest exchange-traded funds in November. After the two-month market rout of September and October, even among volatile conditions, seven of the 10 largest ETFs had positive performance in November, according to Morningstar data through Nov. 26. At end of day Friday, the S&P had posted its best week since 1974, so the numbers should improve even a little more once the last day of the month is added, at least for the majority of equit yportfolios among the Top Ten.

Leading the way among equity ETFs was the iShares MSCI Emerging Markets Index (NYSE Arca: EEM), up 12.70% for the month.The Thanksgiving week was also kind to EEM, when the ETF surged 10.24%, through Wednesday the 26th. 

The best performer overall was the SPDR Gold Shares (NYSE Arca: GLD) up

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Although it would like investors to see PNXQ as a complement to QQQ, market conditions and stormy economic views offer stiff headwinds. 

PowerShares Capital Management has renamed its NextQ Portfolio (Nasdaq: PNXQ), an ETF launched last April to build off the brand recognition of the PowerShares QQQ (Nasdaq: QQQQ).

PNXQ is now called the PowerShares NXQ Portfolio. The fund is already known in the market as PNXQ, therefore, PowerShares wants a tie-in to the ticker in attempting to position the fund as a portfolio complement to QQQ, the company said in a statement.

While the company indicated that market use of the ticker symbol drove the early name change for the fund, just how well PNXQ is known in the market, may be the larger issue.

Just launched in April, the fund has yet to attract any considerable assets. It had $1.8 million in market value, as of Sept. 30, and 100,000 shares outstanding,  according to the

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Demolition spreads past financials into broad sell-off; meanwhile, GLD soars and bonds avoids heavy damage.

 

It was a brutally down day on Wall Street by just about any measure on Monday. And exchange-traded funds were not spared any of the punishment.

With the Dow Jones Industrial Average suffering its biggest single-day drop ever (777 points, or a loss of 6.98%), all the broad market equity ETFs received a complementary backlash, and the beating was no longer focused on financial ETFs.

The SPDR Trust (AMEX: SPY) hit a 52-week low mark of 110.97, before closing at 111.38, a 9.47% drop for the day. The S&P 500 Index was down 8.79% for the day, and the Nasdaq Composite was down 9.14%. The Dow's massive loss was not among its 10-biggest drops ever on a percentage basis, but avoiding placement in that infamous group provided little reason to celebrate.

The Diamonds Trust (AMEX: DIA) closed at a 52-week low of 104.75, down 6.40% for

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