Daily ETF Watch: ProShares’ New Gold Funds

ProShares today launched four new funds targeting different segments of the gold miner space. Gold is well off its highs of a few years ago, and everyone has a different opinion on where the gold industry is headed. Whatever you expect gold miners to do, ProShares is providing you a way to double down on that opinion.

The two long/short pairs of funds cover gold miners and junior gold miners; juniors and established gold miners often deviate in their performance because investing in junior gold miners is more speculative. Such companies tend to be more in the exploratory stages and have less in the way of proven mining prospects than an established company.

The four funds that launched on the NYSE Arca are as follows:

• ProShares Ultra Junior Miners (GDJJ)
• ProShares UltraShort Junior Miners (GDJS)
• ProShares UltraShort Gold Miners (GDXS)
• ProShares Ultra Gold Miners (GDXX)

A ProShares press release touted them as the first funds to provide 2x exposure to gold miners, but it should be noted that Direxion offers four funds with similar coverage that provide 3x exposure:

• Daily Gold Miners Bull 3x Shares (NUGT)
• Daily Gold Miners Bear 3x Shares (DUST)
• Daily Junior Gold Miners Index Bull 3x Shares (JNUG)
• Daily Junior Gold Miners Index Bear 3x Shares (JDST)

Both sets of funds are tied to the NYSE Arca Gold Miners Index and the Market Vectors Junior Gold Miners Index. All of the funds charge net expense ratios of 0.95 percent.

KraneShares Breaks New Ground
KraneShares, the ETF firm known for its China-focused funds, has branched out with the fund it launched today. The KraneShares FTSE Emerging Markets Plus ETF (KEMP) made its debut on the BATS exchange, and represents a definite shift in direction for the firm, though China is still looming large in the picture.

KEMP tracks the FTSE Emerging incl China Overseas non-R/QFII GDP Weighted Index, which determines country weights based on the International Monetary Fund’s five-year purchase power parity GDP forecasts, according to the website. The website also notes that the fund’s index methodology tends to weight China and India more heavily than market-cap-weighted indexes would.

The fund doesn’t have QFII access, so it will invest indirectly in the A-shares market through B-shares and ETFs that invest directly in the A-shares market. It will also use the new Shanghai-Hong Kong Stock Connect that allows investors to trade selected mainland China securities via the Hong Kong exchange, and vice versa.

KEMP is currently invested primarily in China, which is almost half of the portfolio; India; Brazil; Russia; and Mexico, with 23 percent of the index allocated to “other” emerging markets.

The fund comes with an expense ratio of 0.68 percent

New SPDR Filing Covers Short-Term EM Debt

State Street Global Advisors recently filed for an emerging market sovereign bond ETF that will compete directly with the ProShares Short Term USD Emerging Markets Bond ETF (EMSH | D).

The SPDR BofA Merrill Lynch Short Term Emerging Markets Government Bond ETF is very similar to EMSH in some ways. Both will cover USD-denominated emerging market debt with five years or less to maturity and at least $500 million outstanding, and both limit the weight of any one country to 10 percent of the index.

Both can include investment-grade debt and high-yield debt. The two benchmarks even have a similar number of components: EMSH’s index has 134 issues, while the SPDR fund’s index covers 155 issues.

However, there are some differences. While the prospectus for the SPDR fund only mentions sovereign debt, EMSH’s prospectus specifically encompasses quasi-sovereign and subsovereign debt as well as sovereign debt, significantly expanding the selection universe. EMSH tracks the DBIQ Short Duration Emerging Market Bond Index.

It’s not clear from EMSH’s prospectus how its index provider, Deutsche Bank, determines which countries qualify as emerging markets. The proposed SPDR fund’s index requires that countries have “risk exposure to a country other than a member of the FX-G10, a Western European country, and a territory of the US or a Western European country.”

The FX-G10 is a bit different from the traditional “G-10,” which covers 11 (originally 10) developed market countries. The prospectus defines it as the members of the euro, as well as the U.S., Japan, the U.K., Canada, Australia, New Zealand, Switzerland, Norway and Sweden. These standards basically classify the entire eurozone as developed, meaning that debt from countries like Latvia, Lithuania, Slovakia and Slovenia is not represented in the index.

EMSH hasn’t exactly been thriving. It launched in late 2013 and has only managed to accumulate $7.5 million in assets. It comes with an expense ratio of 0.50 percent. Perhaps the more specific, pure sovereign nature of the SPDR fund’s exposure will have a greater appeal to investors.

The filing did not include an expense ratio or ticker, but the fund is slated to list on the NYSE Arca.