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ProShares Launches First Breakeven Inflation ETFs

ProShares, the country’s fourth most successful exchange traded fund (ETF) company, 1 today announced the launch of ProShares 30 Year TIPS/TSY Spread (NYSE: RINF) and ProShares Short 30 Year TIPS/TSY Spread (NYSE: FINF), the first ETFs designed to provide exposure to breakeven inflation, 2 a widely followed measure of inflation expectations. The ETFs list on NYSE Arca today.

The two new ProShares ETFs are:

  • RINF — seeks to match the performance of the Dow Jones Credit Suisse 30-Year Inflation Breakeven Index, before fees and expenses.
  • FINF — seeks to provide the inverse of the daily performance of the Dow Jones Credit Suisse 30-Year Inflation Breakeven Index, before fees and expenses.

“Many investors are focused on inflation and closely follow breakeven inflation, a common yardstick for inflation expectations,” said Michael L. Sapir, Chairman and CEO of ProShare Advisors LLC, ProShares’ investment advisor. “We are pleased to offer investors the first ETFs linked to this important economic indicator.”

Breakeven inflation aims to isolate the market’s expectation of inflation implied by the difference in yields between Treasury Inflation Protected Security (TIPS) and Treasury bonds. The Dow Jones Credit Suisse 30-Year Inflation Breakeven Index tracks the returns of a long position in 30-year TIPS and a short position in Treasury bonds. 3, 4

About ProShares

ProShares is the country’s fourth most successful exchange traded fund (ETF) company, 1 with 128 funds and nearly $23 billion in assets. 5 ProShares’ lineup includes the largest family of geared (leveraged and inverse) ETFs. 6 ProShare Advisors and ProShare Capital Management are affiliated with ProFund Advisors, which was founded in 1997. Together, they manage more than $26 billion in ETF and mutual fund assets. 5

1 Source: Financial Research Corporation, based on analysis of organic net sales of U.S. exchange traded products (as of 6/30/2011). Includes products launched by their current management company; excludes products acquired through purchase or merger.

2 The spread difference in yield between Treasuries and TIPS (Treasury yield minus TIPS yield) is commonly referred to as “breakeven inflation” (BEI) or the “breakeven inflation rate” and is considered to be one measure of the market’s expectation for inflation over a defined period of time.

3 Treasury bonds with the closest maturity to the 30-year TIPS.

4 The index is designed to be a measure of the market’s annualized inflation expectations in the United States over the next 30 years.

5 Assets as of 12/31/2011.

6 Source: Lipper, based on a worldwide analysis of all known providers of funds in these categories. The analysis covered ETFs and ETNs by the number of funds and assets (as of 6/30/2011).

ProShares Short 30 Year TIPS/TSY Spread seeks a return that is the inverse of the return of an index (target) for a single day, as measured from one NAV calculation to the next. Due to the compounding of daily returns, ProShares’ returns over periods other than one day will likely differ in amount and possibly direction from the target return for the same period. Investors should monitor their holdings consistent with their strategies, as frequently as daily.

Unlike many traditional bond funds, these ETFs are not designed to provide steady income. The level of the index (and these funds) will fluctuate based on changes in the price of the underlying bonds, not their yields. The returns of these funds will be more directly linked to percentage changes in the index than percentage changes in breakeven inflation (“BEI”). 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. Additional factors besides inflation expectations, such as liquidity and risk premiums, can materially affect BEI levels. The index is a measure of 30 year “on-the-run” BEI.

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