Between The Numbers

ProShares Pioneering the 130/30 ETF

I worry about the timing with these long-short ETFs. They have to pick stocks to create the basket that is used for ETF share creation/redemption, and they can't be changing it frequently like an actively managed mutual fund. What seems like a decent mix of long-short now can rapidly change, especially if the market moves directionally over a period of time (moving the allocation to 125-25 or if the market went up). Sectors tend to move together, so the short piece might be only a narrow segment of, say, financials and real estate, but if the market turns around in those areas, how will the fund cope with the long-short transition? Once selected, is a stock to be ridden long or short indefinitely? The structure of ETFs is less useful for such re-balancing and active management.