ProShares, the Maryland -based ETF issuer best known for its
wide array of leveraged and inverse ETFs, has expanded its lineup
in this space once again with two more funds. The company has just
released ETFs targeting the financial market with 3x and -3x
leverage over a single day, both tracking the Dow Jones U.S.
Financials Index.
The two funds, the
UltraPro Financials ETF (
FINU
)
on the long side and the
UltraPro Short Financials ETF (
FINZ
)
for bearish exposure, give investors exposure to both sides of the
financial picture, charging investors 95 basis points a year in
fees (see
Beware These Three Volatile Financial ETFs
).
With this focus, investors now have two volatile products that
look to be in focus given the ongoing turmoil in the global
financial markets. However, with the daily rebalancing feature,
long-term returns will likely deviate from what some investors
might expect, suggesting that these products should primarily be
used by short-term traders.
The Index Behind FINU and FINZ
The Dow Jones U.S. Financials Index, which is the basis for both
of the products, looks to act as a broad barometer for the American
financial services industry. Exposure is tilted towards banks and
general financial companies, while REITs (19%) and nonlife
insurance firms (14.9%) round out the top four. In terms of
individual companies in the index, JP Morgan (
JPM
) and Wells Fargo (
WFC
) take the top two spots, accounting for roughly 14.5% of the
benchmark.
ProShares Financial ETF Lineup
The two products also help to round out the exposure
profile for ProShares in the leveraged/inverse financial world.
Before FINU and FINZ, the company already had a (-100%)
Short Financials ETF (
SEF
)
, as well as 2x/-2x funds, as represented by the
Ultra Financials (
UYG
),
and
UltraShort Financials (
SKF
)
funds (read
Three Financial ETFs That Avoid Big Bank Stocks
).
Combined, these three have more than one billion in assets,
suggesting that there is great interest in the space among a wide
swath of investors, making ProShares' decision to launch 3x/-3x
products an easy one.
However, investors should note that ProShares main rival,
Direxion, has already beaten ProShares to the punch when it comes
to the leveraged 3x/-3x financial ETF market. The company already
has the
Daily Financial Bull 3x Shares (
FAS
)
and its short counterpart, the
Daily Financial Bear 3x Shares (
FAZ
)
.
These two funds have proven to be extremely popular among many
investors both from a short-term trading perspective as well as a
hedging strategy as well. FAZ and FAS have more than $2 billion in
combined assets while volumes are quite robust coming in at 8.5
million shares a day for FAS and over 16.4 million a day for FAZ
(read
Guide to the 25 Most Liquid ETFs
).
These volumes suggest that the triple leverage space in the
financial ETF world is an extremely popular one. However, given the
extreme lead that FAZ and FAS have over the new ProShares funds,
FINU and FINZ could have some trouble amassing a decent following,
especially since all the funds have the same expense ratio (see
more in the
Zacks
ETF Center
).
Either way, it will be interesting to see if investors in the
leveraged financial ETF world are looking for a new alterative in
the 3x/-3x markets and if ProShares can capture as many assets in
this market has it has in the other corners of the leveraged ETF
niche.
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@Eric
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DIR-FIN BULL 3X (FAS): ETF Research Reports
DIR-FIN BEAR 3X (FAZ): ETF Research Reports
(FINU): ETF Research Reports
(FINZ): ETF Research Reports
PRO-SH FINL (SEF): ETF Research Reports
PRO-ULS FINL (SKF): ETF Research Reports
PRO-ULT FINL (UYG): ETF Research Reports
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