PowerShares will provide investors with a new way to use ETFs to play the currency market this week, when it unveils two funds tied to the popular U.S. Dollar Index (NYBOT: DX) on Tuesday, February 20. The PowerShares DB US Dollar Bullish Fund (AMEX: UUP) will rise in value when the underlying index rises, while the PowerShares DB US Dollar Bearish Fund (AMEX: UDN) will fall.
The U.S. Dollar Index is the best-known barometer for the value of the dollar in the global market. It relates the value of the dollar against the value of six currencies: the euro, Japanese yen, British pound, Canadian dollar, Swedish Krona and Swiss franc. The index is trade-weighted, meaning the euro has far more weight than the Krona.
The funds will hold futures contracts on the underlying index as their core asset. As with most futures-based investments, they will invest their collateral cash in Treasuries, creating a stream of interest income that could approach 5 percent per year. On the flipside, they will charge 55 basis points in annual expenses.
Beyond these funds, other currency ETFs on the market today include: Rydex’s CurrencyShares, which provide direct, one-for-one exposure to individual currencies like the euro, Japanese yen, etc; and the PowerShares DB G10 Currency Harvest Fund (AMEX: DBV), which uses a simple trading strategy to exploit interest rate differentials among different currencies.
From Water To Whatever
Claymore continues to file unusual one-off exchange-traded funds. The group filed papers with the SEC this week to launch six unusual funds:
Claymore/Clear Global Exchanges, Brokers & Asset Managers: This fund will track an index of fifty stocks gathered from around the world. As with most Claymore funds, this ETF will layer-on a quantitative screen, using growth-oriented factors to choose stocks with the “best” risk/reward profile from among the possible components.
Claymore/Clear Global Vaccine Chain: This fund selects 25 companies from development markets that are operating in the vaccines business. It would have been red-hot during the bird flu epidemic or during the bioterror fears. There is still a lot of interesting research going on in the vaccines market today (cervical cancer, prostate cancer, etc.), but with those fears faded a bit, the fund could face a tough road.
Claymore S&P Global Water: Perhaps the most promising of the new filings, this fund features 50 stocks from developed markets that operate in the water business. It’s evenly split between water utilities/infrastructure companies and water equipment firm.
Claymore/Sustainable Canadian Royale: How’s that for a name? Royale… This fund is essentially an oil sands play, selecting 30 companies involved in the Canadian oil business. The fund has an unusual, split personality: If the price of oil is going up, the fund invests 70 percent of its assets in oil sands exploration companies, with the remaining 30 percent in steady-eddy income trusts (the REITs of the Canadian oil market); if the price of oil is trending down, those percentages are reversed.
Claymore/Zacks Country Rotation: As the name suggests, this fund rotates its portfolio among different countries based on macroeconomic trends.
Claymore/Zacks International Yield Hog: This fund is the ex-U.S. version of the $73 million Claymore Zacks Yield Hog (AMEX: CYM) ETF, offering yet another take on the dividend space.
ProShares added a further 12 ETFs to its impressive list of filings, pushing the total number of ProShares ETFs above 50. The new funds are style variants on Russell indexes, and are:
Like all ProShares, the “Ultra” funds provide 200 percent upside exposure, while the “UltraShort” funds provide 200 percent downside exposure. Earlier, ProShares was launching “Short” funds as well, providing straight short exposure; it seems to have stopped that practice.