ProShares has launched four new ETFs on NYSE Arca. The funds provide a range of leveraged and inverse leveraged exposures to the newly minted Communications Services sector of the S&P 500 Index.
Ben Fulton, Managing Director of ProShares’ tactical products business.
The sector was unveiled by S&P Dow Jones Indices and MSCI, the co-creators of the Global Industry Classification Standard (GICS), in November 2017 following a consultation with investors.
The shake-up revamped the existing Telecommunications Services sector to include those companies involved more widely and directly in the new communication era, including selected companies from the Information Technology and Consumer Discretionary sectors. The sector brings together certain FAANG stocks, media giants and telecom leaders, among others.
The reclassification became effective on 21 September 2018.
The new funds include the ProShares Ultra Communication Services Select Sector ETF (XCOM US) and ProShares UltraPro Communication Services Select Sector ETF (UCOM US), which provide double and triple the daily return of the S&P Communication Services Select Sector Index, respectively, while the ProShares UltraShort Communication Services Select Sector ETF (YCOM US) and ProShares UltraPro Short Communication Services Select Sector ETF (SCOM US) offer double and triple the inverse daily return of the same index.
Each fund comes with an expense ratio of 0.95%.
“ProShares is committed to providing knowledgeable investors with a comprehensive set of tools for tactical investing,” said Ben Fulton, Managing Director of ProShares’ tactical products business. “To that end, we are particularly excited about adding leveraged and inverse communication services ETFs to our sector suite.”
Inverse & leveraged funds may provide an efficient means for sophisticated traders to obtain tactical exposures; however, they are generally considered unsuitable for retail investors who may not fully understand the risks involved.
This type of fund tends to decay in value if held for an extended period of time, potentially leading to significant losses especially in volatile but range-bound markets. This characteristic generally increases with the degree of leverage involved.
The new funds coincide with similar ETFs being launched by rival issuer Direxion.
The Direxion Daily Communication Services Index Bull 3X Shares (TAWK US) and Direxion Daily Communication Services Index Bear 3X Shares (MUTE US) provide triple the daily return and triple the inverse daily return on the S&P Communication Services Select Sector Index, respectively. They are slightly more expensive than the ProShares’ offering; TAWK comes with an expense ratio of 1.01%, while MUTE costs 1.07%.