ProShares 3X Financials ETFs Take On Direxion
July 12, 2012
ProShares, the largest purveyor of leveraged and inverse ETFs, today rolled out a bull-and-bear pair of triple exposure equity ETFs focused on the U.S. financial sector, going head-to-head against a similar pair offered by Direxion Funds.
The ProShares UltraPro Financials ETF (NYSEArca: FINU) and the ProShares UltraPro Short Financials ETF (NYSEArca: FINZ) offer a play on both sides of the Dow Jones U.S. Financials Index through strategies that are designed to serve up three times the daily performance of the underlying index and its inverse.
The funds each cost 0.95 percent, which includes a fee waiver of 1.09 percent, according to the latest prospectus the company filed with U.S. regulators. Direxion also charges 0.95 percent on its Daily Financial Bull 3x Shares (NYSEArca: FAS) and Daily Financial Bear 3x Shares (NYSEArca: FAZ). Both were launched in 2008.
Like Direxion’s funds, the ProShares ETFs will invest in everything from regional and major U.S.-based banks, to insurance companies, real estate names, credit card issuers and even publicly traded stock exchanges. Direxion’s strategies are linked to the Russell 1000 Financial Services Index.
It goes without saying that the financial sector has been particularly volatile since the credit crisis of 2008 showed just how vulnerable the banking system could be. Accessing the segment via leveraged and inverse funds can be even more challenging for the average investor. Such funds move quickly and, more to the point, can deviate significantly from their indexes. Vigilance is thus crucial.
Still, funds like FINU and FINZ clearly have an interested audience, especially among investors and traders who are looking to hedge their positions in the short term. Direxion’s success with its funds speaks to that demand.
FAS has tagged on gains of more than 12.5 percent in the past month alone, and has year-to-date returns of some 32 percent at a time when the S&P 500 Index has returned about a fifth of that amount. The fund now boasts more than $1.29 billion in assets.
Its counterpart tells a different tale. FAZ has shed 37 percent in value year-to-date, and its assets are about half of its bullish partner, at $613 million.
ProShares has more than $22 billion in assets tied to its various ETFs, ranking as the sixth-largest ETF provider in the U.S., according to data compiled by IndexUniverse.
Paul and Ugo discuss the rumors surrounding the SEC's new approach to passive ETFs and whether investors have learned any lessons from the recent moves in gold.See All