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ProShares Plans Alternative Solution and Dividend ETFs - ETF News And Commentary

Diversification, risk aversion and steady income are all hot topics in the stock market this year thanks to the elevation of risk-off trade sentiments in the investing world. Issuers are packaging their products in a risk-efficient way in order to offer investors higher risk-adjusted capital gains and steady income.

Along with several other issuers, ProShares has also joined the bandwagon and filed for an alternative solution ETF and one dividend ETF targeting the Europe, Australasia, Far East (EAFE) space.

Below we take a closer look at these two new filings and how the operating environment will shape up for these ETFs, if ever approved (read: A Better Yield ETF? UBS Launches High Income ETN ).

ProShares MSCI EAFE Dividend Masters ETF

This fund looks to track the MSCI EAFE Dividend Masters Index. This market-cap oriented index aims at companies made up of the MSCI EAFE Index and that have raised dividend payments each year for a minimum of 7 years.

The index is equal-weighted containing at least 40 stocks. The allocation to a single sector is capped at 30% of the basket while the ceiling for a single country is 45% of the index weight (read: Dividend ETFs Explained: What Investors Need to Know ).

With already low interest rates prevailing in Europe and Japan and the European Central Bank's decision of further easing the monetary policy, dividend investing targeting this region should be an appealing idea at present.

This scenario should help the proposed fund in finding a place in yield-hungry investors' portfolios. Investors should note that, steady dividends are normally paid by the more mature and bigger companies which should be less impacted by economic peaks and valleys.

As far as competition goes, PowerShares International Dividend Achievers ETF (PID) might pose as a tough rival to assets as this fund is quite successful in attracting investors' money. It now has billion-dollar AUM status.

ProShares Morningstar Alternatives Solution ETF

The ETF looks to track the Morningstar Alternatives Index. The index gives investors exposure to alternative asset classes in order to beef up risk adjusted portfolio returns when compared to an array of traditional investments.

The index has exposure to an inclusive set of alternative ETFs involving strategies like long/short, market neutral, managed futures, hedge fund replication, private equity, infrastructure or inflation-related investments (read: First Trust Launches Global Multi Asset ETF ).

Alternative solutions have been in vogue lately as the ETF industry is rapidly evolving and plain vanilla equity funds that often rely solely on market capitalization fail to weather doldrums in market movements. By investing in diverse asset classes, which have low correlations with conventional asset classes, the proposed fund will likely reduce volatility and offer stability to a portfolio.

In terms of competition, though the space is not teeming with other funds, it is building up fast. Though the strategy of the proposed fund might not be exactly similar to the presently available products due to its extreme diversified offerings, it will likely face some competition from players in the long/short and hedge fund space.

In the long/short space, ProShares RAFI Long/Short ETF ( RALS ) and AdvisorShares' Accuvest Global Long Short ETF ( AGLS ) have amassed a sizable following, while IQ Hedge Multi-Strategy Tracker ( QAI ) has made a name for itself when it comes to asset generation in the hedge fund ETF space.

We believe, that upon receiving regulatory approval, the fund will be able to garner investor attention as PowerShares Multi-Strategy Alternative Portfolio (LALT) - a similar kind of product - made it to the top five assets generators in the long/short space just within days after its launch (read: PowerShares Launches New Active Multi-Strategy ETF ).

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PRO-RAFI L/S (RALS): ETF Research Reports

ADVSR-ACC GLS (AGLS): ETF Research Reports

IQ-HEDGE MUL-ST (QAI): ETF Research Reports

PWRSH-INTL DVD (PID): ETF Research Reports

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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