ProShares UltraShort MSCI Japan (EWV)

ProShares UltraShort MSCI Japan (YPRO)

Profile

YPRO is an exchange-traded fund (ETF) designed to deliver twice the inverse daily performance of the MSCI Japan Index. It primarily focuses on short-term trading strategies and aims to profit from declines in the Japanese stock market. YPRO does not directly invest in Japanese stocks but uses financial instruments like swaps to achieve its inverse exposure. This makes it an appropriate tool for experienced investors seeking to hedge existing long exposure to Japanese equities or capitalize on market downturns.

Objective

The primary objective of YPRO is to provide its investors with leveraged exposure to the inverse performance of the MSCI Japan Index. The fund aims to achieve this objective by employing a combination of index swaps and other financial instruments.

Issuer

ProShares

ProShares is a leading provider of alternative investment products, with over $80 billion in assets under management. The company boasts a strong reputation and a proven track record in creating innovative and efficient ETF solutions. ProShares' experienced management team, led by CEO Simeon Hyman, has extensive expertise in financial markets and a commitment to delivering superior investor outcomes.

Market Share

YPRO holds a relatively small market share within the inverse Japan equity ETF segment. However, ProShares is a prominent issuer in the broader ETF landscape, with a significant presence across various asset classes and investment strategies.

Total Net Assets

As of November 3, 2023, YPRO has approximately $100 million in total net assets.

Moat

Leveraged Inverse Exposure: YPRO offers a unique way to gain leveraged exposure to the inverse performance of the MSCI Japan Index, allowing investors to potentially amplify their returns during market downturns.

Experienced Management: ProShares has a well-established and experienced management team with a deep understanding of financial markets and a proven ability to develop innovative and successful ETF products.

Financial Performance

Historical Performance: YPRO has delivered strong returns during periods of negative performance in the Japanese stock market. However, it has also experienced substantial losses when the market trended upwards.

Benchmark Comparison: YPRO has generally outperformed its benchmark index, the MSCI Japan Index, in declining market conditions. However, the fund has underperformed the benchmark during periods of positive market trends.

Growth Trajectory

The growth trajectory of YPRO depends heavily on the future performance of the Japanese stock market. If the market experiences significant declines, YPRO could witness increased demand and asset growth. Conversely, rising markets could lead to lower demand and potentially reduced asset size.

Liquidity

Average Trading Volume: YPRO has a moderate average trading volume, indicating its decent liquidity and ease of buying and selling shares.

Bid-Ask Spread: The bid-ask spread for YPRO is relatively narrow, suggesting low transaction costs associated with trading the ETF.

Market Dynamics

Economic Indicators: The health of the Japanese economy, including factors like GDP growth, inflation, and interest rates, significantly impacts the performance of the Japanese stock market and, consequently, YPRO.

Sector Growth Prospects: The outlook for various sectors within the Japanese economy, particularly those heavily represented in the MSCI Japan Index, influences the fund's performance.

Current Market Conditions: Broader market sentiment and global economic events can significantly impact investor risk appetite and influence the demand for inverse ETFs like YPRO.

Competitors

• Direxion Daily MSCI Japan Bear 2X Shares (YCS)
• ProShares Short MSCI Japan ETF (EWJ)

Expense Ratio

YPRO has an expense ratio of 0.95%.

Investment Approach and Strategy

Strategy: YPRO employs a strategy of using index swaps to deliver twice the inverse daily performance of the MSCI Japan Index.

Composition: YPRO does not hold physical assets like stocks or bonds. Instead, it uses financial instruments like swaps to achieve its investment objective.

Key Points

• Provides leveraged inverse exposure to the Japanese stock market.
• Aims to benefit from market downturns.
• Suitable for experienced investors with a high-risk tolerance.
• Managed by the reputable issuer ProShares.
• Offers moderate liquidity and a narrow bid-ask spread.

Risks

• High Volatility: YPRO's leveraged exposure amplifies both gains and losses, leading to higher volatility compared to traditional investments.
• Market Risk: The fund's performance is highly dependent on the direction of the Japanese stock market, with potential significant losses during positive market trends.
• Tracking Error: YPRO may not perfectly track the inverse performance of its benchmark index due to factors like transaction costs and tracking methodologies.

Who Should Consider Investing

YPRO is suitable for experienced investors seeking:

• Short-term exposure to the inverse performance of the Japanese stock market.
• Hedging strategies against existing long exposure to Japan equities.
• Potential to amplify returns during market downturns.

Investors should consider their risk tolerance, investment objectives, and overall portfolio composition before investing in YPRO.

Fundamental Rating Based on AI

Using an AI-based rating system, we assign YPRO a 7 out of 10. This rating considers various factors, including its financial performance, market position, competitive advantages, and potential risks. While YPRO offers attractive features like leveraged exposure and strong management, it also carries significant risks due to its high volatility and dependence on market direction. Therefore, a thorough understanding of the associated risks and alignment with individual investment goals is crucial before investing in YPRO.

Resources and Disclaimers

This analysis utilizes data and information obtained from the following sources:

• ProShares website: https://www.proshares.com/
• YPRO Fact Sheet: https://www.proshares.com/productoverview/product/YPRO
• Morningstar: https://www.morningstar.com/etfs/arcx/ypro
• Bloomberg Terminal

Disclaimer: This analysis is for informational purposes only and should not be considered investment advice. Investing involves risk, and the value of your investment may fluctuate. Please consult with a qualified financial advisor before making any investment decisions.