ProShares, the fund provider known for its leveraged and inverse funds, today rolled out a bearish euro play versus the dollar that adds yet another wrinkle to a bull-and-bear pair of euro-dollar strategies the company already offers.
The ProShares Short Euro ETF (NYSEArca: EUFX) offers the single daily inverse performance of the spot U.S. dollar price of the euro as measured by the EUR/USD cross rate published by Bloomberg at 4:00 p.m. every day. EUFX costs 0.95 percent.
The fund is the latest investment product designed to cater to investor’ wariness regarding the future of the eurozone. The region struggles with enormous amounts of debt that have been coursing through financial markets for more than two years, often causing great volatility in asset prices. The crisis has yet to show signs of abating.
ProShares’ other inverse euro play, the ProShares UltraShort Euro (NYSEArca: EUO)—which serves up twice the inverse of the daily performance of the euro relative to the U.S. dollar—has fared well during the crisis, posting gains of more than 13.6 percent in the last three months.
EUO has also gathered more than $902.8 million in assets since it came to market in 2008, far more than its bullish counterpart, the double exposure ProShares Ultra Euro (NYSEArca: ULE), which has only $5.4 million in assets. ULE, the bullish twin, has fallen 13 percent in value in the same three-month period.
EUFX will own currency futures contracts and rely on cash instruments and U.S. Treasurys for collateral, the company said in its most recent prospectus.
The inverse fund is, by design, a trading and hedging tool rather than a buy-and-hold instrument because of the compounding of daily returns.
The returns of such securities differ significantly from the performance of their benchmarks, particularly in volatile and largely trendless markets.
With EUFX, ProShares now has five currency-focused ETFs on the market, including EUFX and the other two double-exposure euro-dollar plays, as well as two yen-focused funds—one a double-exposure bullish play on the yen-dollar cross, the other a double exposure bearish play.
EUFX was first outlined in a prospectus putting into registration a total of eight ETFs.
Apart from EUFX, those seven other funds now in the product pipeline include three single-exposure bullish plays focused on the Australian dollar, the Canadian dollar and the Swiss franc, and another trio focused on the same three currencies—but bearish and double exposure, according to a registration statement dated May 11, 2012.
The seventh is a single-exposure short play on the yen versus the dollar.
ProShares said in that regulatory paperwork that it would begin rolling out the funds some time during the second quarter of 2012.
Investors have fewer—but better—choices.
Sometimes what’s behind a very high dividend yield is truly surprising.
For VIX-related ETFs to work as that ‘magical’ hedge, you have to time the market. Good luck with that.
But this new product is different than other euro-hedged funds.