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Thursday, January 21, 2010

ProShares Levers Up On Treasuries

by: Patricia Kelly

The ProShares family of funds expanded by two on Thursday with the launch of two leveraged Treasury ETFs, as the company aims to meet investor demands for leveraged long counterparts to its two already-popular inverse fixed-income ETFs. ProShares already holds the distinction of being the largest provider of leveraged and inverse funds and ETFs.

The ProShares Ultra 20+ Year Treasury ETF and the ProShares Ultra 7-10 Year Treasury ETF, which began trading on the NYSE Arca today, are both offered at 95 basis points. The Ultra 20+ Year Treasury fund is designed to deliver twice the performance of its benchmark, the Barclays Capital 20+ Year U.S. Treasury Index, for a single trading day, after fees, expenses, and interest income. Meanwhile, the Ultra 7-10 Year Treasury ETF aims to generate twice the performance of the Barclays Capital 7-10 Year U.S. Treasury Index in one day, excluding fees, expenses, and interest income.

“The new ETFs provide magnified exposure to Treasury securities and afford potential opportunities to benefit from dips in interest rates,” stated Mike Sapir, Chairman and CEO of ProShare Advisors LLC, the investment advisor to ProShares. “With the addition of these two ETFs, ProShares offers the largest lineup of leveraged and inverse Treasury ETFs.”

The addition of the two new funds ups ProShares' fixed-income ETF count to five. In April 2008, the firm launched the UltraShort 7-10 Year Treasury and UltraShort 20+ Year Treasury – two inverse fixed-income ETFs that surged in popularity when investors began betting against long-dated Treasuries. The ProShares portfolio also includes a Short 20+ Year Treasury ETF.

“No matter what the longer-term interest rate trend, short-term up and down moves can offer tactical investment opportunities for knowledgeable investors,” Sapir added. “With these new ETFs, ProShares now offers both leveraged and inverse exposure to the U.S. Treasury market.”

So far, the UltraShort 20+ Year Treasury fund has been the reigning jewel in ProShares' portfolio as the fund saw cash inflows of $2.2 billion in 2009, making it the largest leveraged ETF based on AUM. Whatever the markets have in store for U.S. Treasuries in 2010, the asset class is continuing to pique investors' interests, attracting some firms but repulsing others. As reported by the MFWire Wednesday, PIMCO'S Bill Gross – at the helm of the titanic Total Return Fund – plans to shun U.S. Treasuries in 2010. Perhaps others, like ProShares, will be more willing to wager there's still treasure to be found in Treasuries. 

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