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Exchange-traded funds have become a trillion-dollar industry, with millions of investors jumping into ETFs both old and new. But as companies keep coming up with new twists on the popular product, it's tough to find the perfect ETF from among well over a thousand funds investors have to choose from.

Fortunately, many ETFs come from large families of funds that the same asset manager oversees. Over the past couple of months, we've looked at SPDRs, iShares, and Vanguard. Now, let's consider an up-and-coming fund giant with one of the widest varieties of funds: PowerShares.

The new kid in town
PowerShares is a relatively recent entrant to the ETF world, having started just in 2003. The ETF that the company is best known for, however, didn't even start under its roof. PowerShares obtained the rights to manage PowerShares QQQ (Nasdaq: QQQ  ) , which has tracked the popular Nasdaq-100 index since March 1999 near the end of the tech boom, from the Nasdaq OMX Group in late 2006.

Invesco (NYSE: IVZ  ) now owns the fund company, but it remains a distant fourth place to the big three in the industry. While iShares, SPDRs, and Vanguard ETFs control an estimated 82% of the market, PowerShares weighs in with just 4.2%. Moreover, that market share has actually fallen in the past several years.

A smorgasbord for investors
In order to compete, PowerShares has left almost no stone untouched. With well over 100 ETFs available to investors, PowerShares gives you exposure to just about any type of investment you'd ever want. In addition to easy, liquid Nasdaq 100 ownership, PowerShares ETFs can give you the following:

  • In commodities, PowerShares has taken a strong stand, giving investors a lot of different investment options. The broad-based PowerShares DB Commodity Index Tracking ETF provides exposure to a wide range of commodities, but you can also narrow in on particular niches with ETFs like PowerShares DB Oil (NYSE: DBO  ) .
  • The company has also made a name for itself in international investing, with its PowerShares International Dividend Achievers ETF (NYSE: PID  ) giving investors worldwide exposure to dividend-paying stocks.
  • In currencies, the PowerShares DB US Dollar Index Bullish ETF tracks the U.S. dollar index, which rises in lockstep with the dollar's movements against a basket of currencies that includes the euro, Japanese yen, and British pound, among others.
  • Somewhat surprisingly, PowerShares has also found some success in more income-oriented investments. Its PowerShares Financial Preferred (NYSE: PGF  ) ETF, which invests in preferred shares of banks and other financial stocks, has well over $1 billion in assets under management. Its PowerShares Insured National Muni Bond (NYSE: PZA  ) is also a good choice for those seeking tax-free income in municipal bonds, which pay highly attractive rates compared to Treasuries right now.
  • Finally, the company also targets a number of small niches. For instance, one niche product that has become very popular is the PowerShares Global Water ETF (NYSE: PIO  ) , which invests in companies around the world that are poised to cash in on providing much-needed water resources to the growing economies of the planet.

With so many funds, though, it's tough for some PowerShares ETFs to catch on enough to generate significant assets under management. The company has nearly two dozen ETFs with $20 million or less in assets, many of which trade very small average dollar volumes every day. Yet with so much competition, PowerShares isn't afraid to try new ideas -- and even if some of them fail, those that survive could well more than make up for those failures.

You've got the power
With its latest foray into actively managed ETFs, PowerShares remains on the cutting edge of the ETF universe. Unfortunately, innovation may not be enough to boost the company's position against its competition; often, larger companies can sit back and wait for which niche products do well and then poach that demand with products of their own. But PowerShares won't give up without a fight -- and while you definitely don't need all of PowerShares' ETF offerings, some of them deserve a second look for ETF investors.

ETFs have become increasingly important for investors who want to make money. Check out The Motley Fool's free special report on ETFs to find the three ETFs that could truly soar in the next recovery.

Fool contributor Dan Caplinger never overlooks a good set of ETFs. You can follow him on Twitter here. He doesn't own shares of the funds mentioned in this article. The Motley Fool owns shares of and has created a ratio put spread position on PowerShares QQQ. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy doesn't overlook a thing.

Read/Post Comments (1) | Recommend This Article (1)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 05, 2011, at 2:41 PM, MHedgeFundTrader wrote:

    The garlic eaters don't want to repay their debts, and the beer drinkers don't want to lend them any more money. That pretty much sums up the financial tensions that exist within Europe right now. The PIIGS countries of Portugal, Ireland, Italy, Greece's, and Spain are lurching from one emergency financing to the next. European interest rates are sky high. Never mind that much of that money was borrowed to buy Mercedes, BMW's and Volkswagens, which enriched Germany's economy mightily.

    This is one of many reasons why I think the Euro will continue to fall against the dollar, possibly to as low as the mid $1.10's sometime in 2012. The US is growing, and Europe is not. End of story. American interest rates are rising, while Europe's are not. Another end of story. This always attracts capital to flow out of the low yielding currency and into the high yielding one, which is creating a rising tide of buyers of greenbacks and sellers of Euro's.

    On Friday, Italian, Spanish and Portuguese bonds traded better than expected. Germany's Chancellor Angela Merkel hinted they might bend a little on terms. The China and Japan have said they would happily take down a chunk of the high yielding European debt. With ten year Japanese Government Bonds yielding a paltry 1%, can you blame them?

    The Mad Hedge Fund Trader

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