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ProShares Embracing Alternative ETFs: Barron’s


After establishing itself as an exchange traded fund purveyor of inverse and leveraged strategies, ProShares has ventured into the alternative space, offering a range of alts plays to expand beyond traditional beta indexing styles.

“The company has undertaken a significant repositioning to become the premier provider of alternative ETFs,” CEO Michael Sapir said in a Barron’s article.

The fund provider now markets ETFs that cover long/short investments, merger arbitrage opportunities and a global private equity firms. [Manage Risk and Diversify with Alternative ETFs]

The shift in the provider’s strategy may come down to assets. ProShares inverse funds experienced heavy outflows last year as the markets rallied. At the end of 2012, the company’s assets dipped to 1.6% of total ETF assets from 2.2% year-over-year.

In comparison, IndexIQ , a company known for its alternative strategies, saw assets surge 48% in hedged alternative products over the same period.

Most investors have not picked up these more complex alternative investments as they don’t fully understand how they work. However, interest may rise with huge sell-offs.

“We’ve been talking about the bond bubble with advisors for a year,” Adam Patti, chief executive at IndexIQ, said in the article. “Every time we see a market disaster, the phones ring off the hook,”

For instance, when the bond bubble bursts, investors could look at the IQ Hedge Multi-Strategy ETF (QAI) or the ProShares Hedge Replication ETF (NYSEArca: HDG) , which both track hedge fund strategies other than traditional beta indexing.

Other alternative ETF strategy providers include WisdomTree Investments , PowerShares and AdvisorShares .

For more information on ETFs, visit our ETF 101 category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.