By taking on a higher long position while shorting weaker stocks, the funds seek to generate alpha, or outperformance. For instance, the ProShares Credit Suisse 130/30 (NYSEArca: CSM), which tries to reflect the performance of the Credit Suisse 130/30 Large-Cap Index and overlaps with much of the S&P 500 universe, has gained 16.6% year-to-date, whereas the S&P 500 has increased 15.6% year-to-date.
Additionally, investors may consider the First Trust Enhanced 130/30 Large Cap Index ETN (NYSEArca: JFT). JFT tracks the First Trust Enhanced 130/30 Large Cap Index, which is a modified equal-weighted total return index that selects stocks from a universe of 2,500 largest U.S. stocks. Investors should also be aware that this is an ETN and not an ETF. [What is an ETF? — Part 12: Exchange Traded Notes]
For past stories in this series, visit our “What is an ETF?” category.
Max Chen contributed to this article.