More Leveraged/Inverse ETFs For New Sector

January 16, 2019

Today ProShares launched a quartet of ETFs tied to the communications services sector of the S&P 500. The four funds offer leveraged and inverse exposure to the underlying index, and include the following:

The “Ultra” funds offer -200% and 200% exposure to their underlying index, while the “UltraPro” funds offer -300% and 300% exposure to the index.

The new ETFs each come with an expense ratio of 0.95% and list on the NYSE Arca.

New Sector

The Global Industry Classification Standard’s communication services sector combines the old telecommunications sector with media and internet companies that generally fell under the consumer discretionary or technology sectors previously. The end result is that the newly formed sector includes many of the companies falling under the FAANG acronym and related firms, such as Facebook, Netflix and Alphabet (Google’s parent company).

“It’s a very active sector,” said ProShares’ Managing Director Ben Fulton. He notes that $4.6 billion in assets is already attached to ETFs based on indexes tracking the performance of the communication services sector that are designed for different types of investors. The leveraged and inverse product suite introduced by ProShares today is designed for use by traders, Fulton says.

According to him, the 3x funds are likely to appeal to investors with a high level of conviction regarding the sector, while the 2x funds are tools that will appeal to sector rotators.

“This idea of having 2x and 3x [exposure], is a little bit like 3D movies,” Fulton said. “It adds a whole third dimension to what an ETF strategist or professional investor can do.”

Other Products

Among the products tied to the new sector, the largest is the Communication Services Select Sector SPDR Fund (XLC), which is based on the same index as the new ProShares funds, which launched in June 2018 and already has $3 billion in assets under management.

And earlier this week, Direxion rolled out the Direxion Daily Communication Services Index Bull 3X Shares (TAWK) and the Direxion Daily Communication Services Index Bear 3X Shares (MUTE).

The pair of ETFs from Direxion is more expensive than the ProShares products, charging 1.10% and 1.07%, respectively.

Contact Heather Bell at [email protected]

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