ProShares Ultra MSCI Emerging Markets (EET)

Overview

ProShares Ultra MSCI Emerging Markets (EMM) seeks to deliver two times the daily performance of the MSCI Emerging Markets Index. It aims to provide leveraged exposure to the performance of emerging market equities, targeting investors seeking amplified returns from this asset class. The strategy is not to replicate the index but to achieve its stated leveraged objective through the use of derivatives and other investment strategies.

Reputation and Reliability

ProShares is a well-established issuer of leveraged and inverse ETFs, known for its specialized investment products. They have a significant track record in offering sophisticated ETF strategies to sophisticated investors.

Management Expertise

ProShares utilizes experienced portfolio managers who specialize in constructing and managing leveraged and inverse investment strategies, often employing complex financial instruments to achieve their stated objectives.

Goal

To provide daily investment results that are 2x the daily performance of the MSCI Emerging Markets Index.

Investment Approach and Strategy

Strategy: EMM aims to achieve its investment objective by investing in financial instruments that, in combination, provide two times the daily return of the MSCI Emerging Markets Index. This typically involves using futures, options, and swaps.

Composition The ETF's holdings are not directly comprised of the underlying stocks of the MSCI Emerging Markets Index. Instead, it holds derivatives and other synthetic instruments designed to mirror the index's daily movements with a 2x leverage.

Market Share: Specific market share data for EMM within the broader emerging markets ETF sector is difficult to isolate due to the leveraged nature of the fund and its specialized investor base. However, it represents a niche within the emerging markets ETF landscape.

Total Net Assets (AUM): 750000000

Key Competitors

• iShares MSCI Emerging Markets ETF (EEM)
• Vanguard FTSE Emerging Markets ETF (VWO)
• iShares Core MSCI Emerging Markets ETF (IEMG)

Competitive Landscape

The emerging markets ETF space is dominated by large, passive index-tracking ETFs like EEM, VWO, and IEMG. EMM operates in a distinct niche, catering to investors seeking amplified, short-term directional bets on emerging markets rather than long-term diversification. Its primary advantage is its leveraged exposure, offering potentially higher returns over short periods. Its disadvantages include significantly higher risk, amplified losses, and the impact of compounding on daily returns, making it unsuitable for buy-and-hold strategies.

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Benchmark Comparison: The MSCI Emerging Markets Index has shown mixed performance over the past few years. For example, if the MSCI Emerging Markets Index returned 1% on a given day, EMM would aim to return 2%. Conversely, a 1% loss in the index would result in a 2% loss for EMM. Due to its leveraged nature, direct long-term performance comparisons to the index are often misleading due to daily rebalancing and compounding effects.

Expense Ratio: 0.96

Average Trading Volume

The average daily trading volume for EMM is sufficiently high to ensure reasonable liquidity for most investors.

Bid-Ask Spread

The bid-ask spread for EMM is generally tight, reflecting its popularity among active traders and institutional investors.

Market Environment Factors

EMM is significantly influenced by global economic growth, geopolitical stability in emerging economies, currency fluctuations, commodity prices, and investor sentiment towards risk assets. Changes in interest rates and monetary policy in major economies also play a crucial role.

Growth Trajectory

As a leveraged ETF, EMM's growth is less about expanding its asset base for long-term holding and more about its utility as a short-term trading tool. Its strategy remains consistent: 2x daily leveraged exposure to the MSCI Emerging Markets Index. Changes to holdings are primarily driven by rebalancing to maintain the leveraged objective.

Competitive Edge

EMM's primary competitive advantage lies in its ability to offer amplified, 2x daily exposure to emerging market equities. This allows investors to potentially magnify their gains during favorable market movements. It caters to a specific segment of investors who understand the risks of leveraged products and seek short-term, high-conviction plays on emerging market performance.

Volatility

EMM exhibits significantly higher historical volatility compared to its unleveraged counterparts due to its 2x daily leverage. Its price movements can be exaggerated in both positive and negative market swings.

Market Risk

The specific market risks associated with EMM are inherent to emerging markets, including political instability, currency devaluation, economic downturns, and regulatory changes. Additionally, the leveraged nature of EMM introduces amplified risk of loss, and the daily rebalancing can lead to tracking error and impact returns over periods longer than one day.

Ideal Investor Profile

The ideal investor for EMM is an experienced trader or sophisticated investor with a strong understanding of leveraged financial products, a high-risk tolerance, and a short-term investment horizon. They should be actively monitoring their positions and comfortable with the potential for substantial losses.

Market Risk

EMM is best suited for active traders and short-term speculators. It is not appropriate for long-term investors or those seeking a stable, diversified exposure to emerging markets.

ProShares Ultra MSCI Emerging Markets (EMM) offers 2x daily leveraged exposure to the MSCI Emerging Markets Index. It is designed for short-term, high-conviction trading strategies and is managed by ProShares, a specialist in leveraged ETFs. While it provides amplified return potential, it also carries significantly higher risk and is unsuitable for buy-and-hold investors. Its expense ratio is higher than unleveraged ETFs, and its performance can deviate from the underlying index over longer periods due to compounding effects.

Data Sources:

• ProShares official website
• Financial data aggregators (e.g., Bloomberg, Morningstar, Yahoo Finance)

Disclaimers:

This information is for informational purposes only and does not constitute investment advice. Leveraged ETFs are complex instruments and carry a high risk of loss. Investors should consult with a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results.