By Murray Coleman
If imitation is the best form of flattery, then certainly ProShares and Rydex can be considered gushing all over themselves to claim supremacy in the market for inverse and leveraged exchange-traded funds.
Stealing a bit of each other's thunder, the two launched 10 new ETFs on the same day.
ProShares started the flurry by issuing two inverse sector ETFs, pushing its sector-focused total to 26 so far, on June 12. The two latest are the Short Oil & Gas ProShares (AMEX: DDG) and the Short Financials ProShares (AMEX: SEF).
At the same time, Rydex Investments launched eight new ETFs. Each will be branded as RydexShares and provide leveraged and inverse exposure to S&P Select Sector indexes. (By comparison, the ProShares use Dow Jones benchmarks.)
Of course, the Select Sector indexes are the basis for SSgA's popular traditional line of long ETFs. The RydexShares will cover the same territory, but provide leveraged (or double-long exposure) and inverse (or short positions) in those same sectors.
The latest Rydex inverse funds are: the Rydex Inverse 2x S&P Select Sector Energy ETF (AMEX: REC); the Rydex Inverse 2x S&P Select Sector Financial ETF (AMEX: RFN); the Rydex Inverse 2x S&P Select Sector Health Care ETF (AMEX: RHO); and the Rydex Inverse 2x S&P Select Sector Technology ETF (AMEX: RTW).
The latest leveraged listings from the firm are: the Rydex 2x S&P Select Sector Energy ETF (AMEX: REA), Rydex 2x S&P Select Sector Financial ETF (AMEX: RFL), Rydex 2x S&P Select Sector Health Care ETF (AMEX: RHM), and Rydex 2x S&P Select Sector Technology ETF (AMEX: RTG).
The newest ProShares sector ETFs join two others focusing on the same sectors: the UltraShort Oil & Gas ProShares (AMEX: DUG) and the UltraShort Financials ProShares (AMEX: SKF). At more than 17 million shares traded, DUG's average daily volume makes it one of the most popular ETFs in that regard on the market right now.
That has translated into big asset-gathering numbers as well. Together, those two ETFs have attracted more than $2 billion in assets.
The RydexShares come with an expense ratio of 0.70% each. Meanwhile, the new ProShares are priced at 0.95% each.
"Financial professionals have shown significant interest in leveraged and inverse strategies for their potential to help capitalize on directional market moves or hedge an investment portfolio," said Carl Verboncoeur, chief executive at Rydex Investments, in a statement.
RydexShares leveraged and inverse Select Sector ETFs complement the firm's existing lineup of leveraged and inverse ETFs, which provide broad-market exposure to small-, large- and mid-cap benchmarks.
Recent market volatility has given rise to increased demand for ETFs that enable advisors to short specific segments of the market or take advantage of sector opportunities by using leveraged strategies, says Edward Lopez, director of ETF strategies at Rydex.
"The availability of new products combined with increased interest in leveraged and inverse ETFs calls for education about how these sophisticated products work, including their potential benefits and risks," he said.