ProShares UltraShort MSCI Emerging Markets (EEV)

Overview

ProShares UltraShort MSCI Emerging Markets (EEV) seeks daily investment results, before fees and expenses, that correspond to two times the inverse (-2x) of the daily performance of the MSCI Emerging Markets Index. It is designed for sophisticated investors seeking to profit from short-term declines in emerging markets equities. EEV utilizes financial instruments such as swap agreements to achieve its leveraged inverse objective. The ETF is not intended for long-term investment.

Reputation and Reliability

ProShares is a well-known issuer specializing in leveraged and inverse ETFs, with a generally strong reputation for accurately tracking targeted benchmarks, although leveraged products inherently carry higher risks.

Management Expertise

ProShares has extensive experience managing leveraged and inverse ETFs, with a dedicated team specializing in these complex products.

Goal

To seek daily investment results, before fees and expenses, that correspond to two times the inverse (-2x) of the daily performance of the MSCI Emerging Markets Index.

Investment Approach and Strategy

Strategy: This ETF aims to deliver twice the inverse of the daily performance of the MSCI Emerging Markets Index using derivatives and other financial instruments.

Composition The ETF's composition primarily consists of financial instruments such as swap agreements, futures contracts, and other derivatives designed to achieve its leveraged inverse exposure. It does not directly hold physical stocks of emerging market companies.

Market Share: The market share of EEV is relatively small compared to broader emerging market ETFs.

Total Net Assets (AUM): 64100000

Key Competitors

• Direxion Daily Emerging Markets Bear 3X Shares (EDZ)
• iShares MSCI Emerging Markets ETF (EEM)
• Vanguard FTSE Emerging Markets ETF (VWO)

Competitive Landscape

The competitive landscape is dominated by large, broad-based emerging market ETFs like EEM and VWO. EEV differs significantly with its leveraged inverse strategy, which is suitable for short-term tactical positions and not for long-term investment. EEV advantages are its potential for high returns during market downturns; its disadvantages include high risk, potential for rapid value erosion, and the complexities of leveraged instruments.

Historical Performance: Historical performance is highly dependent on the performance of the MSCI Emerging Markets Index, with negative performance when the index rises and positive performance when the index falls. Due to its leveraged nature, volatility is magnified.

Benchmark Comparison: The ETF's performance is benchmarked against two times the inverse of the MSCI Emerging Markets Index's daily performance. Tracking error can occur due to fees, expenses, and the complexities of managing leveraged positions.

Expense Ratio: 0.95

Average Trading Volume

EEV's average trading volume is moderate, which can fluctuate significantly depending on market conditions and investor interest, with an average daily volume between 100,000 to 200,000 shares.

Bid-Ask Spread

The bid-ask spread is typically wider compared to more liquid ETFs due to the leveraged nature and lower trading volume, potentially adding to trading costs.

Market Environment Factors

Economic conditions in emerging markets, global trade tensions, currency fluctuations, and changes in investor sentiment significantly impact EEV's performance. Concerns about China's economic growth or geopolitical risks in emerging regions are major drivers.

Growth Trajectory

The growth trajectory of EEV is highly dependent on negative sentiment towards emerging markets. There are no major changes expected in its strategy or holdings, as it aims to consistently deliver -2x the daily return of the benchmark.

Competitive Edge

EEV's competitive advantage lies in its highly specialized focus on providing a leveraged inverse exposure to emerging markets, a niche strategy not widely replicated. This allows sophisticated investors to express bearish views on emerging markets with significant leverage. Its primary value proposition is the potential for amplified returns when emerging markets decline. ProShares' expertise in managing leveraged and inverse ETFs provides additional credibility, although the strategy is inherently high-risk and best suited for short-term tactical trades.

Volatility

EEV exhibits extremely high volatility due to its leveraged nature and exposure to emerging markets, making it unsuitable for risk-averse investors.

Market Risk

The ETF faces significant market risk due to its inverse relationship with emerging market equities. It is subject to potential losses if emerging markets rise, and the leveraged structure amplifies these losses. Daily rebalancing can also lead to compounding issues over longer periods, potentially eroding value even if the underlying index remains relatively stable.

Ideal Investor Profile

Sophisticated and active traders who have a short-term bearish outlook on emerging markets and understand the risks associated with leveraged and inverse ETFs are the ideal investors.

Market Risk

EEV is best suited for active traders who use it as a short-term hedging or speculative tool. It is not appropriate for long-term investors or those seeking passive index exposure.

ProShares UltraShort MSCI Emerging Markets (EEV) is a leveraged inverse ETF designed for short-term tactical trading, seeking to deliver -2x the daily performance of the MSCI Emerging Markets Index. It is not suitable for long-term investment due to its high volatility and the potential for value erosion through compounding. It is primarily intended for sophisticated investors who have a bearish outlook on emerging markets and understand the risks involved. EEV provides a unique tool for expressing short-term negative views on emerging market equities, but should be used with caution and a clear understanding of its leveraged structure.

Data Sources:

• ProShares Official Website
• ETF.com
• Morningstar

Disclaimers:

The data and analysis provided are for informational purposes only and should not be considered investment advice. Investment decisions should be made based on individual risk tolerance, financial situation, and after consulting with a qualified financial advisor. Leveraged and inverse ETFs are inherently risky and may not be suitable for all investors.