ProShares, a leading provider of leveraged and inverse ETFs, announced the launch on Friday of the first ETFs with leveraged and inverse exposure to the biotechnology sector. The Ultra Nasdaq Biotechnology (BIB) will seek to provide 200% of the return on the NASDAQ Biotechnology Index for a single day. The UltraShort Nasdaq Biotechnology (BIS) will seek daily returns equal to -200% of the daily movement in the same benchmark.
The biotech sector is one of the most crowded corners of the ETF industry. There are currently five variations of biotech ETFs, including funds from iShares (IBB), Merrill Lynch (BBH), State Street (XBI), PowerShares (PBE), and First Trust (FBT). In aggregate, these ETFs have more than $3 billion in assets and trade well more than 1 million shares daily. The largest and most heavily-traded of the biotech ETFs, IBB, tracks the performance of the NASDAQ Biotechnology Index to which the new ProShares ETFs are linked.
The biotech sector has been one of the top performers in 2010, as a wave of M&A activity and positive regulatory developments have provided a boost (see Is Your Biotech ETF A Leader Or Laggard?). The profitability of biotech companies often hinges on the prospects for a few key products, so it’s not uncommon for stocks in this sector to see big single day jumps or slides on news of FDA approval or rejections. In addition, recent developments surrounding health care legislation have heightened interest in biotechs. “We’re pleased to provide investors with ProShares ETFs benchmarked to the most popular biotech index,” said Michael L. Sapir, Chairman and CEO of ProShare Advisors LLC, ProShares’ investment advisor. “Many investors have strong opinions on the biotech industry, and these ETFs provide them with leveraged or inverse exposure to the sector to help them act on their views.”
Boom Continues…For Now
ProShares has been one of the most active ETF issuers on the new product front in 2010, already introducing more than a dozen new ETFs this year (including leveraged Treasuries, 3x ETFs linked to four popular indexes, and a line of China, real estate, and materials products) . This pace is expected to slow considerably in coming months, as the SEC recently announced that that it will be conducting an investigation into the use of derivatives by ETFs and mutual funds. During the review, the SEC won’t be approving any new leveraged or inverse ETFs, slowing down one of the fastest-growing corners of the ETF industry. According to the February figures from the National Stock Exchange, leveraged and inverse ETF assets exceeded $31 billion, representing an increase of nearly 20% from the same period a year earlier.
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Disclosure: No positions at time of writing.