ProShares is best known for its extensive lineup of leverage
and inverse
ETFs
which stretch across a number of asset classes and segments.
However, the firm has expanded its focus on the 'regular' ETF
market as well in recent years as it has seen the debut of a
handful of these products in order to round out its lineup to
more longer-term focused investors (see
Five Emerging Market Infrastructure ETFs for the
Coming Boom
).
In fact, investors saw a few of these products hit the market
in 2012 including the
USD Covered Bond ETF (
COBO
)
, the
German Sovereign/Sub-Sovereign ETF (
GGOV
)
, and the
Merger ETF (
MRGR
)
, showcasing that the company is committed to this unleveraged
space. If that wasn't enough, the firm is also looking to get
into the global ETF market with an infrastructure play as
evidenced by
its latest filing with the SEC
.
While a number of details were not available in the initial
release-such as expense ratio or ticker symbol-some key points
were released in the filing, which we have highlighted below for
investors who may be looking for a new infrastructure play from
ProShares should it pass regulatory hurdles:
The proposed fund looks to track the NMX 30 Infrastructure
Global Index which is a benchmark of 30 of the largest and most
liquid firms, from around the world, that are engaged in the
development of basic infrastructure facilities. The index
provider, LPX, defines basic infrastructure as facilities that
are physical, constructible objects that have a long life and a
high investment cost (see
Time to Buy the India Infrastructure ETF
).
Additionally, these infrastructure components generally have
low operating costs, inelastic demand, and high barriers of
market entry. According to the filing, LPX believes that a
combination of these characteristics creates a 'natural monopoly'
which can create favorable investment conditions.
This is kind of a vague definition, but this generally refers
to companies that are engaged in the creation of toll
roads/bridges, airports, ports, pipelines, communication
networks, and electric power grids. These types of infrastructure
are arguably the building blocks of a nation and, in addition to
being crucial, have a great deal of pricing power due to the wide
moat nature of these types of projects.
Companies that engage in these types of projects are generally
lower risk than the overall market, while they also pay out solid
yields as well. This could make these types of firms solid
choices for investors seeking some low beta choices, while they
probably won't be appropriate for investors seeking a strong
growth or high risk play (read
Why It Is Time for the Brazil Infrastructure
ETF
).
ETF Competition
It doesn't appear as though there are a host of competitors to
this proposed ETF in the 'basic infrastructure' segment. However,
in terms of global infrastructure ETFs, there are a number of
already established funds which could act as deeply entrenched
foes for any future ProShares product.
In particular, iShares'
IGF
and SPDR's
GII
both look to be decent options in the global infrastructure
market. These two both launched in 2007 so they have been out
there for quite some time, though their total combined AUM is
less than $500 million.
This, along with average volumes for both below 100,000
suggests that investors haven't really embraced the space,
despite some decent returns, modest fees, and hefty yields which
exceed 4% on an annual basis.
Given this, it will be interesting to see if ProShares can
obtain approval for this fund and if its focus on 'basic'
infrastructure will be enough to propel it to a decent level of
AUM past some of the others in the space (see
Q4 ETF Asset Report: Broad Market ETFs Reign
).
If the holdings in this type of product are different enough,
and if ProShares can sell investors on this as a great wide moat
strategy, it could be a winner. However, the battle for AUM in
this space will certainly be difficult, especially given than at
least a few of the competitors have had a half decade head start
in what is still an overlooked segment of the global stock
market.
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@Eric
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Long GII
PRO-SH USD CV B (COBO): ETF Research Reports
PRO-GRMN SOV/SS (GGOV): ETF Research Reports
SPDR-F/M GI100 (GII): ETF Research Reports
ISHARS-SP GL IN (IGF): ETF Research Reports
PRO-MERGER (MRGR): ETF Research Reports
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