FactorShares Launches 5 Spread ETFs

February 24, 2011

FactorShares, at long last, serves up its lineup of spread ETFs.

FactorShares, the New York-based money management firm, finally launched its first-of-its-kind lineup of spread ETFs that allow investors to simultaneously hold long and short positions in one security that offers double exposure to its underlying indexes.

The ETFs give investors access to several broad asset classes by creating exposure to the S&P 500 Index, U.S. Treasury bonds, gold, oil and the dollar. While the ETFs are designed for sophisticated investors, they genuinely create new options in sideways markets and shifting risk premiums, as we wrote about a year ago when FactorShares filed to market the funds.

The commodities exposure means the products invest in futures contracts, and that means contango and backwardation can affect returns. Also, the ETFs rebalance daily as part of their double-exposure design, meaning returns over time can differ a lot from those on the underlying indexes. In other words, inexperienced investors probably shouldn’t try these new funds.

The first five FactorShares ETFs available today on the New York Stock Exchange’s electronic platform, Arca, include:

  • FactorShares 2X: S&P500 Bull/TBond Bear (NYSEArca: FSE)
  • FactorShares 2X: TBond Bull/S&P500 Bear (NYSEArca: FSA)
  • FactorShares 2X: S&P500 Bull/USD Bear (NYSEArca: FSU)
  • FactorShares 2X: Oil Bull/S&P500 Bear (NYSEArca: FOL)
  • FactorShares 2X: Gold Bull/S&P500 Bear (NYSEArca: FSG)


“With the creation of FactorShares, spread trading among the major asset classes requiring two separate positions and indiscriminate rebalancing is in the past,” FactorShares Chief Executive Officer and co-founder Stuart Rosenthal said in a press release.

The new funds have an annual management fee of 0.75 percent, though total expense ratios of the various funds could be between 1.10 percent and 1.20 percent, Rosenthal said in a telephone interview.

"We are very clear that the products are intended for sophisticated investors - traders and institutional investors. These types of investors have been doing spread trading for a long, long time, and this represents a more efficient representation of spread trading," Rosenthal said in the interview.




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