ProShares Plans ‘Aristocrats’ Payout ETF

July 22, 2013

ProShares takes a detour from super-niche strategies to file for an S&P 500 dividend fund.

ProShares, an ETF firm known for its alternative strategies, including the world’s biggest family of leveraged and inverse funds, filed regulatory paperwork for the ProShares S&P 500 Aristocrats ETF, an equity fund with a dividend strategy that selects the S&P 500 constituents with the most reliable payout histories.

The ProShares S&P 500 Aristocrats ETF will pull in at least 40 market-cap-weighted stocks from the S&P 500, selecting only those that have paid increasing dividends for at least 25 years. The constituents of the fund will be equally weighted, and no sector will be allowed more than a 30 percent allocation.

The ProShares S&P 500 Aristocrats ETF, which doesn’t have a ticker or price yet, is a rather-plain-vanilla strategy for ProShares. The issuer errs on the side of the niche when drafting investment strategies for ETFs, with funds that hedge on volatility; short and ultrashort emerging markets equity funds; and bond funds with a covered-call twist.

It looks like the firm is looking to serve up an income-producing strategy at a time when bond yields are rather low. Moreover, stock prices are likely to hold up relatively well in any bond market sell-off, providing extra allure for bond-fund investors who may be facing capital losses once interest rates start to truly normalize.

The fund will rebalance quarterly in January, April, July and October, and will hold foreign as well as domestic equity stocks.



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