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ProShares launches first ETFs offering short exposure to Treasury bonds

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ProFunds Group, a US provider of short and leveraged exchange-traded funds and mutual funds, has launched two new ProShares ETFs designed to deliver positive returns when US Treasury bond

ProFunds Group, a US provider of short and leveraged exchange-traded funds and mutual funds, has launched two new ProShares ETFs designed to deliver positive returns when US Treasury bond prices fall. ProShares introduced short ETFs to the market in 2006 and now offers 38 Short ProShares across a wide range of asset classes, sectors and investment styles.

‘Because the flight to quality during the credit crunch crisis pushed up Treasury prices, many market watchers are suggesting that investors reconsider their Treasury positions,’ says ProShares chairman and chief executive Michael Sapir, noting that when a high-profile bond expert such as Pimco’s Bill Gross calls Treasury bonds ‘the most overvalued asset in the world, bar none,’ investors usually take note.

ProShares short Treasury ETFs provide a way to hedge away some of the uncertainty about the Treasury bond market, or to profit if prices decline. ‘These new ProShares make it easier than ever to gain short exposure to intermediate- or long-term Treasury prices,’ Sapir says. ‘It’s as simple as buying an ETF.’

The new funds, which are listed on the American Stock Exchange, are the UltraShort Lehman 7-10 Year Treasury, whose objective is to achieve, before fees and expenses, twice the inverse of the daily performance of the Lehman Brothers 7-10 Year U.S. Treasury Index, and the UltraShort Lehman 20+ Year Treasury, which seeks twice the inverse of the Lehman 20+ Year index performance. Interest earned on cash and financial instruments will also contribute to the funds’ performance.

Short fixed-income ETFs enable investors to achieve short exposure without opening a margin account, and limits the potential downside, since investors can lose only the amount that they invest, as opposed to the theoretically unlimited losses to which short selling of securities, security baskets or ETFs is exposed.

ProShares launched the first ETFs offering built-in short or magnified exposure to various leading indices in June 2006 and currently offers 62 ETFs with USD17bn in assets under management. ProShares is part of the USD24 billion ProFunds Group, which also includes more than 60 mutual funds.

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