Michael Sapir and his team at ProShares today unveiled the ProShares Hedge Replication ETF.
The new product comes with an expense ratio of 95 basis points. The ETF's benchamrk is the Merrill Lynch Faactor Model -Exchange Series. [
The ETF "addresses challenges of hedge fund investing and may be, for many investors, an attractive alternative to hedge funds," Sapir said, in a press release.
The product is the third in the Alpha ProShares category. The other two are ProShares Credit Suisse 130/30 and
Company Press Release
ProShares Launches ETF as Alternative to Hedge Funds
Aims to provide hedge fund characteristics without the challenges of hedge fund investing
Bethesda, MD, July 14, 2011 — ProShares®, a premier provider of alternative exchange traded funds (ETFs), today announced the launch of the ProShares Hedge Replication ETF (NYSE: HDG). HDG’s benchmark is based on Merrill Lynch’s recognized hedge fund replication model. The ETF lists on NYSE Arca today.
HDG seeks to provide the risk/return characteristics of a broad universe of hedge funds without many of the challenges of hedge fund investing. Historically, a broad universe of hedge funds, as measured by the HFRI Fund Weighted Composite Index, has had attractive risk-adjusted returns relative to equities1 (past performance is not a guarantee of future results). However, there are many deterrents to investing in hedge funds, such as illiquidity, limited transparency and high fees.
"Many portfolios could benefit from the risk/return characteristics of hedge funds, but investors often either can't or don't invest in hedge funds because of a variety of challenges," said Michael L. Sapir, Chairman and CEO of ProShare Advisors LLC, ProShares' investment advisor. "We are pleased to offer an ETF that addresses challenges of hedge fund investing and may be, for many investors, an attractive alternative to hedge funds."
HDG is the third ETF in the Alpha ProShares category. Alpha ProShares are designed to provide advanced investment strategies in an ETF and represent ProShares' further expansion within the alternative ETF space. ProShares introduced its first Alpha ProShares, the ProShares Credit Suisse 130/30 (NYSE: CSM), in July 2009 and its second Alpha ProShares ETF, the ProShares RAFI Long/Short (NYSE: RALS), in December 2010.
About HDG's Benchmark
HDG seeks to match, before fees and expenses, the performance of the “Merrill Lynch Factor Model® — Exchange Series” (MLFM-ES).2 The MLFM-ES was developed by Merrill Lynch, a pioneer and leader in the field of hedge fund replication.
The MLFM-ES aims to provide the risk/return characteristics of a broad universe of hedge funds by targeting a high correlation to the HFRI Fund Weighted Composite Index, an equally weighted composite of more than 2,000 constituent hedge funds.
The MLFM-ES aims to achieve its goal through long or short exposures to six market factors. The exposures are arrived at through regression analysis of index return data.
ProShares is a premier provider of alternative ETFs, with 121 funds and more than $26 billion in assets. ProShares is the largest provider of geared (leveraged and inverse) ETFs.3 ProShares is part of ProFunds Group,® which was founded in 1997 and includes more than $32 billion in mutual fund and ETF assets.4
1 Risk-adjusted return, as measured by Sharpe Ratios. Equities, as measured by the S&P 500.
2 Note that the Merrill Lynch Factor Model — Exchange Series (MLFM-ES) is a newly created benchmark that is similar to, but not the same as, the Merrill Lynch Factor Model (MLFM), which was introduced in 2006. Each factor model aims to achieve similar market exposures using comparable but different underlying instruments. The MLFM-ES is likely to underperform the MLFM over time due to differences in the underlying cash instruments.
3 Source: Lipper, based on a worldwide analysis of all of the known providers of funds in these categories. The analysis covered the number of ETFs and assets as of 6/30/2010.