The ProFunds Group have been at
the forefront of specialized long, short, and leveraged investment strategies to
mutual fund investors.
Up until recently such features
were unheard of in ETF land, but that's changed.
In June 2006, ProFunds launched a group of ETFs
known as the ProShares. The ETFs offer long, short, and leveraged exposure to
key stock indexes like the Dow Jones Industrial Average, Nasdaq-100, and S&P
500.
Steve Cohen, the Head of
Marketing takes time to discuss progress of the ProShares.
Q: Before
you launched the ProShares ETFs, were you ever concerned about the possibility
they would cannibalize your mutual funds (ProFunds), which use similar
strategies?
SC: We viewed the opportunity to reach investors as
one that far outweighs the risks of cannibalizing ProFunds assets. We find that
many investors are comfortable with the ProFunds while others prefer the
ProShares ETFs. Some use both. So far, we have not seen a shift from ProFunds
assets into ProShares.
Q:
ProShares have enjoyed impressive asset growth
already reaching $2 billion. Is that growth coming from new investors or is it
from converted mutual fund shareholders?
SC:
Asset flows come from a combination of both, but predominantly from new
investors.
Q:Which of your ETFs has the most assets and
trading volume?
SC:
There has been a lot of interest in the short ETFs even though the market has
been in an upswing. Ultra QQQ (Amex: QLD) and Ultra Short QQQ (Amex: QID) has
thus far attracted the most interest in terms of assets and trading volume.
Q:
What are the advantages of using an inverse
performing ETF compared to directly shorting the index or index ETF?
SC:Short ProShares
make short exposure less complicated compared to selling an ETF short. Also, no
margin accounts are needed and ProShares can be used in IRAs.
Q:
What mechanisms are used to obtain leverage and
inverse performance of the underlying indexes?
SC: We use a combination of individual securities along with
futures contracts, options, and swap agreements.
Q.
Some analysts have been publicly critical of the ProShares and
the flood of new ETFs. How do you respond?
SC: There has been a
debate about whether there are too many ETFs in general. Some think there are
fewer ETFs compared to mutual funds at the same stage of their respective
growth, others disagree. Ultimately, the marketplace will decide whether there's
too many ETFs. ProShares has received a ton of positive feedback from the
investment community, which seems to validate our strategy.
