By Ron Rowland:
ProShares announced July 12, 2012 the launch of ProShares UltraPro Financials (FINU - News) and ProShares UltraPro Short Financials (FINZ - News). FINU targets 3x the daily performance of the Dow Jones U.S. Financials Index, before fees and expenses, while FINZ seeks to provide -3x the daily performance of the same index.
Potential investors should be aware that these new ETFs will try to deliver 3x or -3x the return of the underlying index only for a single day. Due to the compounding of daily returns and the 3x impact, returns over periods longer than one day can differ from the target return, in both magnitude and direction. ProShares provides additional information on correlation, leverage, and other risks in the prospectus (pdf).
FINU (FINU overview) uses a combination of swaps and individual stocks while FINZ (FINZ overview) uses only swaps. Expense ratios are capped at 0.95%.
The new ETFs will compete with Direxion’s similar 3x offerings that are based on the Russell 1000 Financial Services Index. The Direxion Daily Financial Bull 3x Shares (FAS - News) and Direxion Daily Financial Bear 3x Shares (FAZ - News) are the entrenched leaders (FAS and FAZ fact sheet pdf), with robust trading histories dating back to November 2008. The new ProShares have the same expense ratio as the Direxion pair.
Disclosure covering writer, editor, and publisher: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.
