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ProShares Files for S&P 500 Aristocrats ETF

Eric Dutram

ProShares has long been a leader in the leverage and inverse ETF market. The company is probably best known for its S&P 500-focused funds—such as SH, SDS and SSO—although it has more than one billion in assets in some of its bond (TBT) and small cap products (UWM) as well.

Yet while the firm has made its name in these levered products, it is apparently looking to branch out into the ‘regular’ ETF market too. The firm has launched several of these products in the past few months such as a private equity fund (PEX) and a merger arbitrage ETF (MRGR), and has recently put another into the pipeline (also see Coming Soon: Rising Rates ETF).

This proposed ETF looks to continue ProShares’ recent trend into the unlevered market, focusing on domestic stocks. While the filing was just an initial one, and thus some key details were not released such as expense ratio or ticker symbol, we have highlighted a few of the important points that were revealed in the document below:

New ProShares Filing in Focus

The proposed fund looks to be for the S&P 500 Aristocrats ETF, which looks to track, before fees and expenses, the performance of the S&P 500 Dividend Aristocrats ETF. This benchmark seeks to give exposure to S&P 500 companies that have increased dividend payments each year for at least the past 25 years (see 3 Red Hot Dividend ETFs).

In total, the index contains a minimum of 40 stocks in its basket, equally weighting among all of the securities. However, it should be noted that no single sector is allowed to make up more than 30% of the index weight, and that rebalancings are done on a quarterly basis, while annual index reconstruction is done in the January rebalance period.

This could result in a relatively safe portfolio of dividend payers who have been very prudent with their cash reserves. However, the yield may not actually be that high for this fund, as the index only intends to look at firms that are consistently increasing dividends, not necessarily those that have a robust yield.

ETF Competition

While dividend-focused ETFs are usually pretty popular, it is worth noting that this won’t exactly be the first product to target the dividend aristocrat space. In fact, there are several other products out there already that have a similar focus, and billions of AUM to boot (see Buy These 3 ETFs for Excellent Dividend Growth).

Particularly, this is the case for the SPDR S&P Dividend ETF (SDY) and the Vanguard Dividend Appreciation ETF (VIG). These two both focus in on stocks that have a history of increasing dividends over long time periods, and thus could be top competitors for any future ProShares product. Plus, the two combine to hold more than $25 billion in AUM, so they will definitely be difficult to unseat.

Given this huge following, ProShares will either have to offer a very low expense ratio, or be able to show some outperformance with its equal-weight methodology in order to attract new investors to the space (also see 3 New ETFs You Should Not Ignore).

If either of these points come to pass, a new ProShares aristocrat ETF could see some interest, as after all, there is clearly a ton of interest in both the dividend space, and the idea of tracking companies that raise dividends year after year for exposure.  

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