A fund that flies under the radar but nonetheless has posted impressive 2013 returns thus far is CSM (ProShares Large Cap Core Plus, Expense Ratio 0.45%). The fund is the best performing ETP in the “Long/Short” category YTD and by a hefty margin compared to the next closest fund (more than 800 bps in excess return YTD).
CSM has attracted $205 million in assets under management which is also the biggest total in the Long/Short category, and the fund averages about 21,800 shares traded daily.
Tracking the Credit Suisse 130/30 Index which “establishes either long or short positions in certain of the 500 largest U.S. market cap equities by applying a rules-based ranking and weighting methodology”. Like typical institutional 130/30 funds, the resulting product has total long exposure of 130% and total short exposure of 30% “at each monthly reconstitution date”, where the proceeds short sales act as margin/buying power on the long side of the portfolio enabling the exposure to climb above 100% to 130%.
A quick examination of the current underlying holdings show that the top long holdings at the moment are AAPL (2.77%), XOM (2.14%), BRK.B (1.78%), WFC (1.74%), and MSFT (1.32%) while the largest short holdings are PLL (0.36%), IPG (0.36%), OI (0.37%), PKI (0.37%), and HCBK (0.37%).
As fund literature suggests, the goal of this product is to provide “incremental risk-adjusted outperformance as compared to the universe”, and in this case the universe that the fund tracks is very similar to that of the S&P 500. It is also noted that the index “will have risk characteristics similar to the universe and will generally rise and fall with the universe”, which in other words states that the underlying index has a beta similar to that of the S&P 500.
Long/Short funds are likely not for everyone, as they remain very popular in the public plans and institutional funds space (think endowments, foundations, and the like) packaged as products other than ETFs (SMAs and otherwise).