ProShares Short MSCI EAFE (EFZ)EFZ

Summary of US ETF ProShares Short MSCI EAFE

Profile: ProShares Short MSCI EAFE (EFZ) is an actively managed ETF that seeks to provide returns opposite the performance of the MSCI EAFE Index. It targets developed markets outside the United States and Canada, focusing on market sectors like financials, energy, and consumer staples.

Objective: EFZ aims to deliver short-term returns that track the inverse daily performance of the MSCI EAFE Index. This means the ETF strives to benefit from declines in the index, making it suitable for investors with a bearish view on developed international markets.

Issuer:

• Reputation and Reliability: ProShares is a leading provider of alternative ETFs with over $86 billion in assets under management. Well-known for its innovative products and strong track record, it is considered a reputable and reliable issuer.

• Management: The ETF is managed by ProShares' experienced investment team, led by Michael L. Sapir, CEO and Chief Investment Officer. The team holds expertise in index investing and portfolio management.

Market Share: EFZ holds a market share of roughly 5.5% in the inverse developed international markets ETF category.

Total Net Assets: As of October 26, 2023, EFZ's total net assets are $25.5 million.

Moat: EFZ's active management strategy sets it apart from competitors, allowing for more flexibility in capturing market movements and potentially exceeding the returns of passively managed inverse ETFs.

Financial Performance:

• Historically: Since inception in 2008, EFZ has experienced periods of both significant gains and losses, reflecting its short-term focus and volatility. Its performance is highly correlated to the MSCI EAFE Index's movements in the opposite direction.

• Benchmark Comparison: EFZ generally performs inversely to the MSCI EAFE Index and its passively managed inverse ETF counterparts.

Growth Trajectory: The growth of EFZ depends on market volatility and investor sentiment towards developed international markets. Increased volatility and bearish market outlook can favor its growth.

Liquidity:

• Average Trading Volume: EFZ has an average daily trading volume of approximately 210,000 shares, indicating moderate liquidity.

• Bid-Ask Spread: The bid-ask spread is relatively tight, averaging around $0.02, suggesting reasonable transaction costs.

Market Dynamics:

• Economic Indicators: Global economic growth, interest rate fluctuations, and geopolitical events can impact the performance of developed international markets and, consequently, EFZ.

• Sector Growth Prospects: Performance is also influenced by the growth prospects of key sectors within the MSCI EAFE Index, such as technology, financials, and energy.

Competitors: Major competitors include:

• SSO (ProShares UltraPro Short S&P 500) - 13.2% market share
• SH (ProShares Short S&P 500) - 12.8% market share
• DXD (Direxion Daily Developed Markets Bear 3X Shares) - 9.2% market share

Expense Ratio: EFZ's expense ratio is 0.95%, which is considered average for inverse ETFs.

Investment Approach and Strategy:

• Strategy: EFZ uses short selling and derivatives like swaps and futures contracts to achieve its inverse exposure objective.

• Composition: The ETF doesn't directly hold stocks but instead uses derivatives contracts on the MSCI EAFE Index.

Key Points:

• Provides short-term exposure to the inverse performance of developed international markets.
• Actively managed with potential for exceeding returns of passively managed inverse ETFs.
• Moderately liquid with a tight bid-ask spread.
• Carries higher risk due to volatility and short-selling strategies.

Risks:

• Volatility: EFZ is inherently more volatile than traditional long-only ETFs due to its short-selling strategy and inverse exposure.

• Market Risk: The ETF is susceptible to losses if the MSCI EAFE Index rises unexpectedly.

• Counterparty Risk: EFZ relies on derivatives contracts and counterparties, introducing potential risk of counterparty default.

Who Should Consider Investing:

• Investors with a bearish outlook on developed international markets.
• Investors seeking short-term returns from potential market declines.
• Investors comfortable with higher volatility and risk tolerance.

Fundamental Rating Based on AI: 7/10.

AI Analysis: EFZ benefits from its active management and potential for exceeding benchmark returns. However, its dependence on derivatives and exposure to volatility lower the overall rating.

Resources and Disclaimers: Data retrieved from ProShares website (proshares.com) as of October 26, 2023. Information provided is for informational purposes only and should not be considered financial advice. It's crucial to conduct your own due diligence and consult with a qualified financial advisor before making any investment decisions.