From the April 2010 issue of Research Magazine • Subscribe!

ProShares Moves to Add Leverage

The eight new ETFs magnify long and short movement -- 300 percent.

ProFunds Group has just introduced several new ProShares ETFs that employ high octane leverage. The funds will utilize triple daily long and short (inverse) strategies on the NASDAQ-100, Dow Jones Industrial Average, S&P MidCap 400 and Russell 2000.

Since mid-2009 the company has managed the UltraPro S&P 500 (UPRO) and the UltraPro Short S&P 500 (SPXU) which attempt to triple the daily long and short performance on the S&P 500.

Even with this latest launch, the ProShares lineup still mostly consists of long and short ETFs that use two times daily leverage. DirexionShares, a Boston-based investment manager, oversees $4.8 billion in long and short daily triple leveraged ETFs.

Leverage refers to an investment strategy that attempts to achieve magnified gains. For example, if the NASDAQ-100 falls by one percent on a given day, a triple inverse focused ETF like SQQQ should rise by three percent. Conversely, if the NASDAQ-100 rises by one percent, SQQQ should fall by three percent.

"Many savvy investors believe that taking advantage of tactical allocation opportunities will be the key to successful investing in the near term. These new ETFs provide knowledgeable investors with additional tools to act on short-term moves in popular U.S. indexes," said Michael L. Sapir, chairman and CEO of ProShare Advisors LLC, ProShares' investment advisor.

All of the leveraged funds charge annual expenses of 0.95 percent and with around $25 billion in assets ProShares is the fifth largest U.S. ETF provider.

The 3x Long Daily Leverage funds are: UltraPro QQQ (TQQQ), UltraPro Dow 30 (UDOW), UltraPro MidCap 400 (UMDD) and UltraPro Russell 2000 (URTY). The 3x Short Daily Leverage funds are: UltraPro Short QQQ (SQQQ), UltraPro Short Dow 30 (SDOW), UltraPro Short Mid Cap 400 (SMDD) and UltraPro Short Russell 2000 (SRTY).

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