ProShares wades deeper into the leveraged- and inverse-ETF pool

ProShares today launched eight exchange-traded funds that aim to magnify their benchmark exposures by 300%.
FEB 07, 2010
ProShares today launched eight exchange-traded funds that aim to magnify their benchmark exposures by 300%. It's the firm's second foray into 300% leveraged and inverse ETFs — it launched its first two such ETFs in June. Leveraged and inverse ETFs seek to achieve a return that is a multiple of the inverse performance of the underlying index, in this case a return that is +300% or -300% of the index. The new funds put ProShares in direct competition with rival Direxion Funds, which launched its first 300% leveraged and inverse ETFs in 2008. “Many savvy investors believe that taking advantage of tactical-allocation opportunities will be the key to successful investing in the near term,” Michael Sapir, chief executive of ProShares, said in a statement. “These new ETFs provide knowledgeable investors with additional tools to act on short-term moves in popular U.S. indexes.” The launch, however, comes at a time when leveraged and inverse ETFs are under fire. In June, the Financial Industry Regulatory Authority Inc. released a statement in which it told broker-dealers that inverse and leveraged ETFs “typically are unsuitable for retail investors” who hold them longer than a day. Finra clarified its position in a July podcast. In that podcast, the regulator said member firms could recommend that a retail investor hold the funds for longer than one day, provided a suitability assessment of the investor and the ETF is conducted by B-Ds. The clarification, however, didn't stop a number of broker-dealers from reacting to Finra's initial statement. A number of B-Ds restricted the sale of leveraged and inverse ETFs or stopped their sale altogether. While much of the furor caused by Finra's initial notice has died down, several class actions related to leveraged and inverse ETFs are still pending. The suits were filed on behalf of investors who may have lost money in the funds. The new ProShare ETFs are: UltraPro QQQ (TQQQ), UltraPro Dow30 (UDOW), UltraPro MidCap400 (UMDD), UltraPro Russell2000 (URTY), UltraPro Short QQQ (SQQQ), UltraPro Short Dow30 (SDOW), UltraPro Short MidCap400 (SMDD) and UltraPro Short Russell2000 (SRTYX).

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