ProShares Files For ProShares 30yr Rising Inflation ETF
ProShares has filed paperwork with the SEC for a “ProShares 30yr Rising Inflation ETF.” The ProShares 30yr Rising Inflation (the “Fund”) seeks investment results, before fees and expenses, that track the performance of the [ ] Index (the “Index”). The Index (Bloomberg Ticker “[ ]”) takes long positions in U.S. Treasury Inflation Protected Securities (“TIPS”) and short positions in U.S. Treasury Securities in order to reflect a position in the 30 year “breakeven” rate of inflation, or the level of inflation required for a TIPS security to approximate the performance of a Treasury security of equivalent duration over the next thirty years. The breakeven rate of inflation represents a measure of the market’s expectations for inflation over the relevant period. The Index is not designed to measure the realized rate of inflation, nor does it seek to replicate the returns of any index or measure of actual consumer price levels.
They did not specify a trading symbol or expense ratio in the initial filing.
Principal Investment Strategies
The Fund invests in a combination of fixed income securities and derivatives that ProShare Advisors believes should track the performance of the Index. Assets of the Fund not invested in fixed income securities or derivatives will typically be held in money market instruments.
- U.S. Treasury Securities — The Fund has exposure to securities issued by the U.S. Treasury, in particular the following:
- U.S. Treasury Inflation-Protected Securities — The Fund generally takes long positions (or obtains long exposure via derivatives, as further described below) in U.S. Treasury Inflation-Protected Securities, or TIPS, which are inflation-protected public obligations of the U.S. Treasury. These securities are designed to provide inflation protection to investors. TIPS are income-generating instruments whose interest and principal payments are adjusted for inflation — a sustained increase in prices that erodes the purchasing power of money. The inflation adjustment, which is typically applied monthly to the principal of the bond, follows a designated inflation index, such as the consumer price index. A fixed coupon rate is applied to the inflation-adjusted principal so that as inflation rises, both the principal value and the interest payments increase. This can provide investors with a hedge against inflation, as it helps preserve the purchasing power of an investment. Because of this inflation adjustment feature, inflation-protected bonds typically have lower yields than conventional fixed-rate bonds.
- U.S. Treasury Bonds — The Fund generally takes short positions (or obtains short exposure via derivatives, as further described below) in U.S. Treasury Bonds, which are public obligations of the U.S. Treasury that pay a fixed coupon and have a maturity of twenty or more years.
- Derivatives — The Fund invests in derivatives, which are financial instruments whose value is derived from the value of an underlying asset, interest rate or index. The Fund invests in derivatives as a substitute for investing directly in or making short sales of the fixed income securities underlying the Index. Derivatives used by the Fund principally include:
- Swap Agreements — Contracts entered into primarily with major global institutions for a specified period ranging from a day to more than one year. In a standard “swap” transaction, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments. The gross returns to be exchanged or “swapped” between the parties are calculated with respect to a “notional amount,” e.g., the return on or change in value of a particular dollar amount invested in a “basket” of securities representing a particular index.
- Money Market Instruments — The Fund invests in short-term cash instruments that have a remaining maturity of 397 days or less and exhibit high quality credit profiles, including:
- U.S. Treasury Bills — U.S. government securities that have initial maturities of one year or less, and are supported by the full faith and credit of the United States.
- Repurchase Agreements — Contracts in which a seller of securities, usually U.S. government securities or other money market instruments, agrees to buy them back at a specified time and price. Repurchase agreements are primarily used by the Fund as a short-term investment vehicle for cash positions.
ProShare Advisors uses a mathematical approach to investing. Using this approach, ProShare Advisors determines the type, quantity and mix of investment positions that the Fund should hold to approximate the daily performance of the Index. The Fund may gain exposure to only a representative sample of the securities in the Index, which is intended to have aggregate characteristics similar to those of the Index. ProShare Advisors does not invest the assets of the Fund in securities or derivatives based on ProShare Advisors’ view of the investment merit of a particular security or instrument, other than for cash management purposes, nor does it conduct conventional research or analysis (other than in determining counterparty creditworthiness), or forecast market movement or trends, in managing the assets of the Fund. The Fund seeks to remain fully invested at all times in securities and/or derivatives that, in combination, provide exposure to its Index without regard to market conditions, trends or direction.
For the complete filing click: HERE