Invesco PowerShares Capital Management LLC, a leading provider of
exchange-traded funds (ETFs), today announced that it has filed
registration statements for two new actively managed ETFs focused
on the non-agency, Prime and Alt-A residential mortgage-backed
securities (RMBS) markets. The anticipated fund names are as
follows:
-- PowerShares Prime Non-Agency RMBS Opportunity Fund
-- PowerShares Alt-A Non-Agency RMBS Opportunity Fund
"We believe that various economic factors have converged to push
the prices of many Prime and Alt-A residential mortgage-backed
securities well below their fundamental values," said Bruce Bond,
president and CEO of Invesco PowerShares. "We are hopeful that
these ETFs will provide access and transparency into these markets
along with some of the much needed additional liquidity originally
intended by the TARP."
The Residential Mortgage-Backed Securities (RMBS) Market
Aggressive mortgage lending practices, declining home prices and
a faltering economy have caused mortgage loan performance to
deteriorate significantly over the last two years. Many holders of
mortgage related securities have come under pressure to raise
capital and reduce exposure to RMBS markets, resulting in
systematic de-leveraging. Invesco PowerShares believes that these
events have pushed the prices of many residential mortgage-backed
securities well below fundamental values implied by conservative
cash flow projections.
Even the prices of senior and super senior residential
mortgage-backed securities, which generally have first right to
principal payments and are typically the last to sustain losses,
have been severely impacted despite their significant credit
enhancement and advantageous position within the capital structure.
As such, Invesco PowerShares believes this may be an opportunity
for investors to recognize above average risk-adjusted returns by
investing in discounted senior and super senior Prime and Alt-A
residential mortgage-backed securities. In addition, Invesco
PowerShares believes these securities should generate current
principal and interest income as well as potential capital
gains.
Market Environment Background: The Troubled Asset Relief Program
(TARP)
On Sept. 19, 2008, the United States Treasury introduced the
Troubled Asset Relief Program (TARP). "The underlying weakness in
our financial system today is the illiquid mortgage assets that
have lost value as the housing correction has proceeded.... These
[assets] are clogging up our financial system, and undermining the
strength of our otherwise sound financial institutions," said
former Treasury Secretary Henry Paulson in a press release dated
Sept. 19, 2008. At the time Mr. Paulson also stated that the
federal government must implement a plan to restore our financial
institutions by creating a program to transition these assets off
their books.
Many of the assets that Invesco PowerShares believes were
originally targeted for purchase by TARP Invesco PowerShares
believes are not particularly "troubled" from a credit perspective,
but are depressed in price due to systemic deleveraging. "What
began as a Subprime lending problem has spread to other, less-risky
mortgages," said Paulson.
In addition to cash considerations, the two anticipated ETFs
anticipate allowing Authorized Participants (APs) to contribute
specific blocks of residential mortgage-backed securities (RMBS) to
the Funds in exchange for shares of the ETFs. This in-kind
transaction may be advantageous for organizations seeking increased
liquidity and diversification within their current exposure to RMBS
markets. In addition, the Funds may offer increased flexibility
with respect to balance sheet and capital requirements. As a
result, it is anticipated that financial institutions which
otherwise were not participating in the ETF market may find it
advantageous to become an AP to transact directly with the
Funds.
Fund Information
The Funds intend to invest primarily in non-agency, residential
mortgage-backed securities. Residential mortgage loans are
primarily classified into one of the following three categories
based on the risk profile of the borrower and the property: Prime,
Alt-A and Subprime. Prime residential mortgage loans are extended
to borrowers who represent a relatively low risk profile through a
strong credit history. Subprime loans are made to borrowers who
display poor credit histories and other characteristics that
correlate with higher default risk. Alt-A loans are made to
borrowers whose risk profile falls between Prime and Subprime.
Prime mortgage loans are further categorized as either "agency"
or "non-agency." Agency loans have balances that fall within the
limits set by the Office of Federal Housing Enterprise Oversight
(OFHEO) and qualify as collateral for securities that are issued by
Ginnie Mae, Fannie Mae or Freddie Mac. Non-agency loans have
balances that may or may not fall within the limits set by OFHEO
and do not qualify as collateral for securities that are issued by
Ginnie Mae, Fannie Mae or Freddie Mac.
-- The PowerShares Prime Non-Agency RMBS Opportunity Fund will seek to
provide total return by investing, under normal market conditions, at least
80% of its assets in non-agency mortgage-backed securities collateralized
by pools of Prime residential mortgage loans.
-- The PowerShares Alt-A Non-Agency RMBS Opportunity Fund will seek to
provide total return by investing, under normal market conditions, at least
80% of its assets in non-agency mortgage-backed securities collateralized
by pools of Alt-A residential mortgage loans.
The Funds' primary investment sub-advisor is Invesco
Institutional (N.A.), Inc. and the Funds' portfolio holdings will
be disclosed daily on the Funds' website.
If you would like to inquire about the Funds or about how
financial institutions transact with the Funds, please contact
TARP@invescopowershares.com.
Invesco PowerShares Capital Management LLC is leading the
intelligent ETF revolution through its family of more than 130
domestic and international exchange-traded funds, which seek to
outperform traditional benchmark indexes while providing advisors
and investors access to an innovative array of focused investment
opportunities. With assets under management of $12 billion as of
Sept. 30, 2008, PowerShares ETFs trade on both U.S. stock
exchanges. For more information, please visit us at
www.invescopowershares.com.
Invesco PowerShares is a wholly owned subsidiary of Invesco
Ltd., a leading independent global investment management firm
dedicated to helping people worldwide build their financial
security. By delivering the combined power of our distinctive
worldwide investment management capabilities, including Invesco
Aim, Atlantic Trust, Invesco, Invesco Perpetual, Invesco
PowerShares, InvescoTrimark, and WL Ross & Co., LLC, Invesco
provides a comprehensive array of enduring investment solutions for
retail, institutional and high-net-worth clients around the world.
Operating in 20 countries, the firm is listed on the New York Stock
Exchange under the symbol "IVZ." Additional information is
available at www.invesco.com.
Risks of Owning Actively Managed ETFs
The Funds are subject to management risk because it is an
actively managed portfolio. In managing the Funds' portfolio
securities, the Sub-Advisers will apply investment techniques and
risk analyses in making investment decisions for the Funds, but
there can be no guarantee that these will produce the desired
results.
Additionally, there are risks associated with investing in
mortgage-backed securities collateralized by Prime and Alt-A
residential mortgage loans. Recently, the residential mortgage
market in the United States has experienced a variety of
difficulties and changed economic conditions that may adversely
affect the value of the Funds' investments. Housing prices in many
states have declined or stopped appreciating, after extended
periods of significant appreciation. As a result of these and other
factors, the value of some mortgage-backed securities has been
negatively impacted.
The Funds intend to invest primarily in mortgage securities
offered by non-governmental issuers. These securities carry greater
risks than investments in U.S. government agency securities.
Because the Funds concentrate their investments in
mortgage-backed securities, the value of the Funds' shares may rise
and fall more than the value of shares of a fund that invests in a
broader range of securities. The Funds also may be subject to
market risk, interest rate risk, credit risk, cash redemptions risk
and non-diversified fund risk.
Mortgage backed securities are also subject to prepayment or
call risk, which is the risk that payments may be received earlier
or later than expected due to changes in the rate at which the
underlying loans are prepaid and may adversely affect its income
and/or market value.
The Funds may also be subject to the risk of deviation between
market price and net asset value (NAV). Actively managed ETFs have
a limited trading history and there can be no assurance as to
whether and/or the extent to which the shares will trade at
premiums or discounts to NAV. The deviation risk is heightened by
the fact that the mortgage-backed securities in which the Funds may
invest may be difficult to value. Because mortgage-backed
securities trade infrequently, the most recent trade price may not
indicate their true value. A third-party pricing service is used to
value the Funds' mortgage-backed securities. There can be no
guarantee to the extent to which market participants will view the
prices for the Funds' portfolio securities generated by the pricing
service as accurate indications of the value of the Funds'
mortgage-backed securities investments. To the extent that market
participants question the accuracy of the pricing service's prices,
there is a risk of significant deviation between the NAV and market
price of the mortgage-backed securities in which the Funds
invest.
Shares are not FDIC insured, may lose value and have no bank
guarantee.
On October 13, 2008, the US Treasury Department instituted
revisions to the TARP program to allow for the purchase of
preferred stock and warrants of financial institutions in order to
provide such institutions with increased capital in lieu of the
purchase of such institutions' "troubled assets." Additionally, on
December 19, 2008 the Bush administration declared that TARP funds
may be spent on any program the President deems necessary to avert
financial crisis. To the extent that markets do not respond
favorably to TARP or TARP does not function as intended, broad,
adverse market conditions may continue for an indefinite period of
time. Moreover, the implications of government ownership and
disposition of troubled assets and the purchase of equity stakes in
financial institutions are unclear, and such a program may have
positive or negative effects on the liquidity, valuation and
performance of the Fund's investments.
Shares are not individually redeemable and owners of the shares
may acquire those shares from the Funds and tender those shares for
redemption to the Funds in Creation Unit aggregations only,
typically consisting of 50,000 shares.
Invesco Aim Distributors, Inc. (Invesco Aim) is the distributor
of the PowerShares Actively Managed Exchange-Traded Fund Trust.
PowerShares� is a registered trademark of Invesco PowerShares
Capital Management LLC (Invesco PowerShares). Invesco PowerShares
is one of the investment advisors for the products and services
represented by Invesco Aim; it provides investment advisory
services to individual and institutional clients and does not sell
securities. Invesco PowerShares and Invesco Aim are indirect,
wholly owned subsidiaries of Invesco Ltd.
An investor should consider each Fund's investment objective,
risks, charges and expenses carefully before investing. The
prospectus contains this and other information about the Funds. For
more complete information about the Funds or to obtain a
prospectus, call 800.983.0903. Please read the prospectus carefully
before investing.
The information in the prospectus is not complete and may be
changed. The Funds may not sell their shares until the registration
statement filed with the Securities and Exchange Commission is
effective. The prospectus is not an offer to sell the Funds'
shares, nor are the Funds soliciting an offer to buy their shares
in any jurisdiction where the offer or sale is not permitted.
Media Contacts: Kristin Sadlon Porter Novelli 212-601-8192 Email
Contact Bill Conboy 303-415-2290 Email Contact
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