ETF Spotlight on FactorShares 2X S&P500 Bull/TBond Bear (NYSEArca: FSE), part of an ongoing series. The exchange traded fund rallied about 17% on Tuesday.
Assets: $1.1 million.
Objective: The FactorShares 2X: S&P500 Bull/TBond Bear fund is a leveraged spread ETF, which profits from the outperformance of the S&P 500 relative to Treasury bonds in one day or less. It rallied on Tuesday as stocks surged and Treasury bond prices declined.
Holdings: The fund mimics the leveraged exposure by holding S&P 500 and Treasury bond futures contracts.
What You Should Know:
- FactorShares is the fund provider.
- FSE has an expense ratio of 0.75%.
- The fund is down 22.92% over the past month and down 50.17% over the last three months.
- The FSE ETF rebalances daily, so the fund will only achieve its target 2X spread return on a day-to-day basis.
- Since the fund has a 2X long and a 2X short exposure, FSE has a gross leverage ratio of 4:1.
- “On extremely volatile days, the fund’s gearing may change a lot, and investors who didn’t buy immediately after the day’s rebalancing may not earn the spread,” according to Morningstar analyst Samuel Lee.
- “Investors in this fund are expressing views in two asset classes,” Lee added. “Both must be correct in order for the trade to be profitable.”
The Latest News:
- U.S. stocks are on their biggest three-day rally in six weeks Tuesday on renewed hopes that Europe will ease its debt crisis, reports Rila Nazareth for Bloomberg.
- “The chorus is getting louder that Europe needs to do something,” James Dunigan, chief investment officer for PNC Wealth Management, commented. “If we step away from the edge and avoid a recession, then there’s no doubt there’s value there.”
- U.S. Treasury prices fell Tuesday as benchmark 10-year note yields inched up neared 2% on speculation of another Eurozone rescue package and diminishing demand for safe-haven assets, reports Karen Brettell for Reuters.
For past stories in this series, visit our ETF Spotlight category.
FactorShares 2X S&P500 Bull/TBond Bear
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.