ProShares Ditches MSCI Index On 2 ETFs

April 15, 2013

The firm is linking leveraged and inverse Europe-focused ‘UPV’ and ‘EPV’ to a FTSE benchmark on April 23.

A bull-and-bear pair of ProShares Europe-focused equities ETFs will begin tracking a FTSE index April 23, ditching its current MSCI benchmark in what is the latest victory for the global index provider over its competitor.

Both the ProShares Ultra MSCI Europe ETF (NYSEArca: UPV) and its bearish counterpart, the ProShares UltraShort MSCI Europe ETF (NYSEArca: EPV) will each drop the "MSCI" part of their current monikers when they are officially linked to the performance of the FTSE Developed Europe Index. Tickers and fees should remain unchanged.

The FTSE index is the same benchmark that now anchors the $10.2 billion Vanguard FTSE Europe ETF (NYSEArca: VGK), a fund that until March was also tied to the MSCI Europe Index, but one that was part of a major Vanguard overhaul that resulted in 22 of its ETFs dropping their MSCI benchmarks for FTSE and CRSP indexes.

It’s unclear whether ProShares’ decision was designed to reduce overall indexing costs, as was the case with Vanguard. The firm told IndexUniverse in a statement that the switch is due to "portfolio management considerations."

"We value our close relationship with MSCI and continue to partner with them on 14 of our ETFs," ProShares Advisors said in the statement.

Still, the latest move certainly not only bodes well for FTSE, but again puts the importance of index providers back into the limelight.

“Indexes are critically important because an index’s methodology dictates the selection and weighting of your investment portfolio,” IndexUniverse ETF analyst Spencer Bogart recently said in a blog about the issue. “Fee structures can vary but, at the end of the day, bigger index fees mean a smaller piece of the pie for you.”

UPV serves up exposure to two times the daily performance of its index, while EPV is a twice-inverse strategy, each costing a net of 0.95 percent a year. On the surface, the index change should not significantly alter the composition of either fund.

The FTSE Developed Europe Index is a market-capitalization-weighted index comprising about 500 large and midcap companies in 16 developed European markets, including the U.K., which represents about 34.5 percent of the mix. The blend and focus is nearly identical to that of the MSCI Europe Index.

Holding Switzerland, France and Germany among its biggest country allocations other than the U.K, the FTSE index has seen year-to-date total dollar returns of 2.9 percent, with that number hitting 11.3 percent in the past one year, according to data provided by FTSE—a performance very similar to the return profile of the MSCI benchmark it’s replacing, according to data on MSCI's website.

UPV has under $11 million in assets, while EPV has some $95 million.



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