ETF Spotlight on the ProShares RAFI Long/Short ETF (NYSEArca: RALS), part of an ongoing series.
Assets: $51.9 million
Objective: The ProShares RAFI Long/Short fund tries to reflect the performance of the RAFI US Equity Long/Short Index, which identifies opportunities that are implemented through both long and short securities positions.
Holdings: Top long holdings include AT&T (NYSE: T) 1.8%, Chevron (NYSE: CVX) 1.8%, Bank of America Corp (NYSE: BAC) 1.7%, JPMorgan Chase (NYSE: JPM) 1.3% and Exxon Mobil (NYSE: XOM) 1.2%. Top short holdings include Cisco (NasdaqGS: CSCO) -1.9%, Schlumberger (NYSE: SLB) -1.7%, Visa (NYSE: V) -1.4%, EOG Resources (NYSE: EOG) -1.3% and Apple (NasdaqGS: AAPL) -1.0%.
What You Should Know:
- ProShares sponsors the fund.
- RALS has a 0.95% expense ratio.
- The ETF includes 233 positions.
- Long sector weights include financial 21.8%, energy 12.8%, consumer cyclical 11.7%, tech 10.8%, health care 10.3%, consumer staples 9.1%, industrial 6.9%, basic materials 6.0%, utilities 5.8% and telecom 4.9%.
- Short sector weights include financial -22.5%, consumer cyclical -14.5%, energy -13.5%, tech -10.4%, health care -10.0%, industrials -10.0%, consumer staples -6.7%, utilities -5.5%, basic materials -4.6% and telecom -2.3%.
- As of March 21, 2014, the fund held 226 long positions and 229 short positions.
- RALS is down 0.7% over the past month, up 5.0% over the past three months and up 2.1% year-to-date.
- The ETF is 2.6% above its 200-day exponential moving average.
- As a long/short strategy, RALS tries to provide absolute return over a full market cycle.
- Due to its strategy, the fund is uncorrelated to traditional asset classes and provides investors with an alternative source for diversification. [Advisors Seek Alternative Investments, ETFs to Diversify Portfolios]
- Holdings are selected based on the RAFI approach, which focuses on fundamental measures such as sales, dividends, cash flow and book value, to determine company weights.
- Stocks with the highest RAFI weight compared to its market-cap weight are given a long position, whereas short positions are taken in stocks with the lowest rank.
- The underlying RAFI Index is rebalanced monthly
Next page: The Latest News
The Latest News:
- More advisors and investors are turning to alternative investments to access asset with a low correlation to traditional stocks and bonds as a way to diversify an investment portfolio.
- “These investments aren’t the right choice for every person and as with any class of investments, there are certainly bad alternative products out there,” Klaas Baks, executive director of the center for alternative investments and an associate professor of finance at Emory University’s Goizueta Business School, said in a Wall Street Journal article. “But when used correctly, alternatives can and do provide individuals with some of the same benefits that have made them attractive to institutions—specifically, diversification, a wider set of investment opportunities and access to leverage.”
- Nadia Papagiannis, director of alternative investment strategy for global third party distribution at Goldman Sachs Asset Management, pointed out that investment portfolios with 20% allocated to alternative investments is “pretty standard,” reports Daria Mercado for InvestmentNews. [Alternative ETF Allocations: The Goldilocks Range]
ProSharse RAFI Long/Short ETF
For past stories in this series, visit our ETF Spotlight category.
Max Chen contributed to this article.
Financial advisors interested in attending the annual alternatives virtual summit on on May 21st can register at Alternatives & Income Virtual Summit.