ProShares Short MSCI EAFE (EFZ)

Overview

The ProShares Short MSCI EAFE (EFZ) seeks daily investment results, before fees and expenses, that correspond to the inverse (-1x) of the daily performance of the MSCI EAFE Index. It provides a way for investors to potentially profit from declines in the MSCI EAFE Index, which represents developed market equities outside of the US and Canada. It's designed for short-term tactical positions and not intended for long-term investment.

Reputation and Reliability

ProShares is a well-known issuer of leveraged and inverse ETFs, recognized for innovation and a wide range of specialized investment products.

Management Expertise

ProShares has a dedicated team of portfolio managers and analysts with experience in managing complex investment strategies, including leveraged and inverse ETFs.

Goal

To provide investment results that correspond to the inverse (-1x) of the daily performance of the MSCI EAFE Index.

Investment Approach and Strategy

Strategy: The ETF employs a daily reset strategy, meaning it resets its exposure to the inverse of the MSCI EAFE Index each day. This approach is designed for short-term trading and can result in significant divergence from the index's performance over longer periods due to the effects of compounding.

Composition The ETF primarily uses financial instruments such as swap agreements, futures contracts, and other derivatives to achieve its investment objective. It does not directly hold the underlying stocks of the MSCI EAFE Index.

Market Share: Data not readily available to determine EFZu2019s exact market share but it is a prominent player in the inverse EAFE ETF space.

Total Net Assets (AUM): 76700000

Key Competitors

• Direxion Daily MSCI EAFE Bear 3X Shares (WEBS)

Competitive Landscape

The competitive landscape includes other inverse and leveraged ETFs targeting the MSCI EAFE Index. EFZ's advantage lies in its simpler -1x leverage, potentially appealing to investors seeking less aggressive short-term exposure. Its disadvantage is that its daily reset mechanism can lead to performance different from the index's inverse returns over extended holding periods, particularly during volatile markets.

Historical Performance: Historical performance is characterized by inverse correlation to the MSCI EAFE Index. Past performance does not guarantee future results.

Benchmark Comparison: The ETF aims to inversely track the daily performance of the MSCI EAFE Index, but due to the daily reset mechanism, longer-term performance may significantly deviate from the inverse of the index's returns.

Expense Ratio: 0.95

Average Trading Volume

The average trading volume of EFZ indicates moderate liquidity, facilitating relatively easy entry and exit for most investors.

Bid-Ask Spread

The bid-ask spread of EFZ reflects its liquidity and can fluctuate depending on market conditions, representing a cost to trading.

Market Environment Factors

Economic indicators, geopolitical events, and investor sentiment towards developed markets (excluding US and Canada) significantly influence the performance of EFZ.

Growth Trajectory

The growth trajectory of EFZ is highly dependent on investor demand for short-term bearish bets against EAFE equities, with adjustments to leverage and holdings in response to market conditions.

Competitive Edge

EFZ's competitive edge lies in its established presence and brand recognition within the inverse ETF space. The ETF offers a straightforward way for investors to express a bearish view on developed market equities (excluding the US and Canada) using a simple -1x leverage. ProShares is a well-known and trusted issuer of specialized investment products. The fund's liquidity is moderate, making it relatively easy for investors to enter and exit positions. However, its daily reset feature requires careful monitoring and is best suited for short-term trading strategies.

Volatility

EFZ exhibits high volatility due to its inverse leverage and the inherent volatility of the MSCI EAFE Index.

Market Risk

Market risk is the primary concern, as the ETF's performance is directly tied to the fluctuations of the MSCI EAFE Index. If the index rises, the ETF will lose value, and the daily reset can amplify these losses over time.

Ideal Investor Profile

The ideal investor is a sophisticated trader with a short-term bearish outlook on developed market equities (excluding the US and Canada) and a thorough understanding of leveraged and inverse ETFs.

Market Risk

EFZ is best suited for active traders and is not appropriate for long-term investors due to the effects of compounding and the daily reset mechanism.

The ProShares Short MSCI EAFE (EFZ) is designed for short-term tactical positions to profit from declines in developed market equities outside of the US and Canada, represented by the MSCI EAFE Index. It utilizes a daily reset mechanism that makes it unsuitable for long-term investments. Its performance is inversely correlated to the index, and investors should be aware of the associated risks of inverse and leveraged ETFs. It is most appropriate for sophisticated traders who understand its mechanics.

Data Sources:

• ProShares Website
• ETF.com
• Morningstar

Disclaimers:

The information provided is for informational purposes only and does not constitute investment advice. Investors should conduct their own research and consult with a financial advisor before making any investment decisions. Leveraged and inverse ETFs are not suitable for all investors.