Route 66

September 13, 2006

The new funds follow the traditional ProShares naming standard:

  • Ultra funds provided 2X-leveraged exposure, meaning they rise 2 percent for every 1 percent up move in the index.
  • Short funds provide inverse exposure, meaning they fall 1 percent for every 1 percent up move in the index.
  • UltraShort funds provide 2X leveraged inverse exposure, meaning they fall 2 percent for every 1 percent up move in the index.

There is no official word yet on expense ratios, but they are likely to be similar to the existing funds, which charge 95 basis points.

Building The Toolbox

ProShares 12 existing funds have already accumulated over $1 billion in assets in just 12 weeks on the market.  Importantly, the funds are also trading over 1 million shares per day.  Trading volume may become a more important measure of success than assets under management for these funds.  While the ProShares do have a role to play in long-term hedging and enhanced alpha strategies (and even in ultra-long-term buy-and-hold investing, as I argued here), they are also ideally designed for aggressive traders. As such, it would not be surprising if the asset counts fluctuate dramatically, while trading volume rises in a straighter line.

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