ProShares to switch geared US sector ETFs to S&P Select indices

January 16, 2023 GeneAka Investment Comments Off

ProShares has announced plans to change the underlying references for 23 ETFs providing tactical exposures to individual sectors of the US equity market.

The ETFs’ new indices will utilize the Global Industry Classification Standard (GICS) to assign companies to specific economic sectors.

The line-up includes ‘Ultra’ (providing 200% of the daily return) and ‘Ultra Short’ (providing 200% of the inverse daily return) ETFs for stocks classified to the real estate, financials, basic materials, consumer goods, consumer services, health care, industrials, oil & gas, technology, and utilities sectors.

Also undergoing changes are two ‘Short’ (providing 100% of the inverse daily return) ETFs on real estate and financial stocks as well as a single Ultra ETF referencing the telecommunications sector.

Anticipated to take effect after the market closes on 17 March 2023, the ETFs will switch from their current ‘Dow Jones‘ sector indices to ‘S&P Select’ indices.

S&p Select indices select their constituents from the bellwether S&P 500 index of US large-cap equities. The change in index will result in the ETFs tracking a fewer number of stocks compared to the outgoing indices which select their constituents from a broader universe comprising stocks in the top 95% of the US equity market’s total capitalization.

Whereas the outgoing indices utilize a proprietary classification system developed by Standard & Poor’s to assign companies to specific economic sectors, the incoming indices are based on the more well-known Global Industry Classification Standard (GICS).

Perhaps the most notable difference between the two classification systems relates to the crossover between stocks classified as information technology, communication services, consumer discretionary, or consumer staples by GICS compared to classifications of technology, telecommunication services, consumer goods, and consumer services by S&P’s proprietary system. Many large household names (including Alphabet, Meta Platforms, Tesla, Walt Disney, and Netflix) are assigned to different sectors depending on the system used.

One such consequence of this disparity is that, despite having less than half the number of constituents, the incoming S&P Technology Select Sector Index is slightly more diversified within its top ten positions compared to the outgoing Dow Jones US Technology Index. The incoming S&P Communications Services Select Sector Index, however, is notably more concentrated than the outgoing Dow Jones US Telecommunications Services Index.

The ETFs undergoing changes are highlighted below:

ProShares Short Real Estate (REK US)
ProShares Ultra Real Estate (URE US)
ProShares UltraShort Real Estate (SRS US)

ProShares Short Financials (SEF US)
ProShares Ultra Financials (UYG US)
ProShares UltraShort Financials (SKF US)

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