Slew of Sophisticated ETFs Hits the Market
Over the past week, ETF-hungry investors were served up 20 new offerings that provide exposure to niche markets, currencies and sophisticated trading strategies, though they may not be the best choice on the menu for the everyday retail investor.
The most recent offering hit the market Monday, with the debut of Rydex Investments' six new ETFs tracking foreign currencies. Rydex had already created the first currency ETF with the Euro Currency Trust (FXE), an ETF that tracks the euro.
Its new funds are the CurrencyShares British Pound Sterling Trust (FXB), the CurrencyShares Australian Dollar Trust (FXA), the CurrencyShares Canadian Dollar Trust (FXC), the CurrencyShares Mexican Peso Trust (FXM), the CurrencyShares Swedish Krona Trust (FXS) and the CurrencyShares Swiss Franc Trust (FXF).
All of these currency plays hold the actual currencies rather than futures contracts, and thus mimic the currency's spot price. A single share of each ETF represents 100 units of the base currency.Meanwhile, last week saw the launch of new ETFs from ProShares and State Street Global Advisors, the investment management group of State Street (STT). Four of the ProShares offerings allow investors to get short exposure to a stock index without having to set up margin accounts or cover margin calls: Short QQQ ProShares (PSQ), Short S&P500 ProShares (SH), Short MidCap400 ProShares (MYY) and Short Dow30 ProShares (DOG). Each ETF bets against the titular index. For magnified exposure, ProShares also set up "ultra funds." These ETFs are designed to capture twice the move of the underlying indices mimicked. SSgA's new funds, which started trading on the American Stock Exchange Thursday, include ETFs focusing on the red-hot oil industry -- the SPDR Oil & Gas Equipment & Services (XES) and SPDR Oil & Gas Exploration & Drilling (XOP) funds -- as well as the mining industry, with the SPDR Metals and Mining (XME) fund. Its other new offerings track the pharmaceutical, banking and retail sectors. While the latest twists on the traditional ETF give investors an opportunity for diversification or an inroad into the world of a sophisticated short-seller, they also assume an investor can use these products as an active money manager might, says Sonya Morris, a mutual fund analyst with Morningstar. And of course, not all retail investors are that savvy.
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