Route 66

September 13, 2006

In the largest single ETF filing ever, ProShares details plans for sixty-six leveraged, short and short-leveraged ETFs.

Whoa Nelly.

In the largest single exchange-traded fund (ETF) filing ever, ProShares has petitioned the Securities and Exchange Commission (SEC) for the right to launch sixty-six - yes, 66 - leveraged, short and short-leveraged ETFs. The new funds track 22 indexes in three broad buckets - stand alone indexes, style indexes and sector indexes. 

As with the 12 existing ProShares ETFs, which track the S&P 500, S&P MidCap 400, Dow Jones Industrial Average and Nasdaq-100 - there will three ProShares tied to each index: one providing 2X long leveraged exposure, one providing short exposure and one providing 2X short-leveraged exposure.

With the new filings, it is clear that ProShares aims to offer a complete line-up of funds to investors. 

The filings cover the following indexes:

Stand Alone Indexes
Russell 2000
S&P SmallCap 600

Style Indexes
S&P/Citigroup 500 Growth
S&P/Citigroup 500 Value
S&P MidCap 400/Citigroup Growth
S&P MidCap 400/Citigroup Value
S&P SmallCap 600/Citigroup Growth
S&P SmallCap 600/Citigroup Value

Sector Indexes
Dow Jones U.S. Basic Materials
Dow Jones U.S. Biotechnology
Dow Jones U.S. Consumer Goods
Dow Jones U.S. Consumer Services
Dow Jones U.S. Financials
Dow Jones U.S. Health Care
Dow Jones U.S. Industrials
Dow Jones U.S. Oil & Gas
Dow Jones U.S. Precious Metals
Dow Jones U.S. Real Estate
Dow Jones U.S. Semiconductors
Dow Jones U.S. Technology
Dow Jones U.S. Telecommunications
Dow Jones U.S. Utilities

The prospectus is available here.

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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