Commentary and analysis on matters related to beta including indexing, exchange traded funds (”ETFs”), derivatives, their application in the portfolio management process and their effect on the investment industry.

ProShares Goes To Level 2

Taking advantage of downside market action in international and emerging markets can now be implemented through new ETFs from ProShares. No comments on this from me as I’ve already said for a while that the market has needed this so here’s the press release:

ProShares Launches First Short International ETFs

Existing ProShares break $9 billion mark

BETHESDA, Md.–(BUSINESS WIRE)–ProShares, the fastest-growing ETF provider this year, announced today the launch of the first-ever short international ETFs, designed to go up when a foreign market goes down. ProShares, the nations only short and magnified-exposure ETFs, recently crossed $9 billion in assets under management.

The six new ProShares, each to be listed on the American Stock Exchange, are:

ProShares   Daily Objective* Ticker
       

Short MSCI EAFE

 

Daily returns equal to the inverse of the daily return of the MSCI EAFE Index

EFZ

       
UltraShort MSCI EAFE   Daily returns equal to two times the inverse of the daily return of the MSCI EAFE Index EFU
       
Short MSCI Emerging Markets   Daily returns equal to the inverse of the daily return of the MSCI Emerging Markets Index EUM
       
UltraShort MSCI Emerging Markets   Daily returns equal to two times the inverse of the daily return of the MSCI Emerging Markets Index EEV
       
UltraShort MSCI Japan   Daily returns equal to two times the inverse of the daily return of the MSCI Japan Index EWV
       
UltraShort FTSE/Xinhua China 25   Daily returns equal to two times the inverse of the daily return of the FTSE/Xinhua China 25 Index FXP
       

* Before fees and expenses

The Short and UltraShort MSCI EAFE ProShares launched today; the remaining four are slated for release in November. After these launches, the Short ProShares lineupproviding short exposure to a wide range of domestic and international markets, capitalization sizes and investment styleswill number 35.

These launches follow ProShares breaking though $9 billion in assets under management after a significant market drop on Friday October 19. Initially launched in June 2006, ProShares had the most successful first year of any ETF company in history.1

The dramatic acceptance of ProShares has been fueled by investors looking to go beyond the basics and expand the strategies they employ in their portfolios. Shorting strategies have been used by serious investors such as institutions and hedge funds for years, said ProShares Chairman and CEO Michael Sapir. By introducing short ETFs to the marketplacefirst on domestic market indexes and now on internationalwe have opened up opportunities for more investors to use short strategies to manage risk or to seek to benefit from market declines.

Short and UltraShort ProShares offer many advantages over shorting baskets of stocks, individual stocks or ETFs. Investors can achieve short exposure without opening a margin accountbuying short exposure is as convenient and simple as purchasing an individual stock. In addition, investors can lose only the amount that they invest, whereas when they short stocks, stock baskets or ETFs, their losses are theoretically unlimited. Moreover, these ETFs can be employed in vehicles that do not permit margin accountsIRAs for instance. And finally, these ETFs can easily be tracked throughout the day.

Investors seeking to hedge gains should understand that they may need to make adjustments to their holdings to maintain a specific level of short exposure over time. Also, the funds have fees, expense and tax consequences of their own. These short ETFs are structured to provide the inverse of the daily performance of the market indexes that they track; that is, if MSCI EAFE declines by 1% in a day, the Short MSCI EAFE ProShares should gain 1%; if the index goes up by 1% in a day, the ETF should lose an equal amount. The UltraShort ProShares are designed to deliver twice the inverse of daily performance; in the above instance, where MSCI EAFE declined by 1% in a day, the UltraShort MSCI EAFE ProShares should appreciate by 2% and if the benchmark rose by 1%, the ETF should decline by 2%.

Post a Comment

You must be logged in to post a comment.