ProShares Broadens Its Focus

February 01, 2020

[This article appears in our February 2020 issue of ETF Report.]  

 

ProShares was once focused on launching an extensive lineup of geared and leveraged ETFs that were among the first of their kind. However, those funds are mainly intended for short-term, tactical purposes. In recent years, the issuer has begun launching a lineup of funds designed for long-term investment, one of which is now its largest fund, the $6.5 billion ProShares S&P 500 Dividend Aristocrats ETF (NOBL). Here, ProShares Managing Director Steve Cohen discusses his firm’s evolution and where it’s headed.

What is ProShares’ driving philosophy?
At the highest level, what we’re trying to accomplish is to provide value-added products for investors and advisors of all kinds. We don’t see ourselves as a plain-vanilla shop or trying to compete with the “Big Three” [iShares, Vanguard, State Street]. We’re very content to look for the kinds of opportunities that are reflected in our products. We can add value in investor portfolios beyond
traditional simple beta.

How has your lineup evolved over the years?
We’ve got a rich history in offering what we call “geared products,” leveraged and inverse products. From day one, that was our growth engine. And it’s been a great story with solid, consistent growth across the product line.

About five years or so ago, we said that we really needed to diversify our product line and our investor base, and we set out on a mission to do just that. We launched several different suites of products that we would consider more buy-and-hold funds versus the geared business, which we see as more tactical tools. And it’s been a whirlwind over the last five years trying to build, in essence, almost a separate ETF business from what we had built before from scratch. That’s really been a big mission over the last five years.

ProShares has been around for a long time, and the ProShares S&P 500 Dividend Aristocrats ETF (NOBL) is now the biggest fund, usurping the largest of your leveraged and inverse funds.
That’s exactly right. [Last year was] a really gratifying one, because we started it with somewhere around $6 billion in those buy-and-hold products. We’re now approaching just shy of $10 billion. Granted, a lot of that has been NOBL, which is now over $6 billion. We continue to diversify that product line.

We’ve got the whole line of dividend growers—we now have eight of those. We just introduced two new ones in November: the ProShares S&P Technology Dividend Aristocrats ETF (TDV) and the ProShares Russell U.S. Dividend Growers ETF (TMDV). The ProShares Russell 2000 Dividend Growers ETF (SMDV) and the ProShares S&P MidCap 400 Dividend Aristocrats ETF (REGL) are both approaching $1 billion.

It’s certainly a story that plays well in an environment where we keep hitting market tops, and investors want to continue to add to equity markets but are certainly concerned about big dips or potential dips.

The selling proposition here is that these funds can perform well with potentially lower volatility and the whole ability to catch a lot of the gains on the up, but also not lose as much on the down—that up/down capture story has really played well this year.

 

For a larger view, please click on the image above.

 

Your geared funds were greeted with a lot of controversy when they first launched, but they do exactly what they’re supposed to do. How should investors view your leveraged and inverse products?
As you said, the products do exactly what they’re supposed to do. And we always say that an educated customer is our best investor.

At this point, investors understand how the products work, both for a day and over time. We consistently suggest monitoring the investment over time. Certainly, knowing what you’re buying is first. Second is monitoring your position and understanding where you’re at, at any particular moment—and then rebalancing if the fund is out of line with what you’re trying to accomplish.

It’s pretty basic. And we’ve also seen really good growth in that business. Our overall assets are up again [in 2019], by 24%.

 

For a larger view, please click on the image above.

 

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