• Short FTSE/Xinhua China 25 (YXI): Linked to the FTSE/Xinhua China 25 Index
• Short Real Estate (REK): Linked to the Dow Jones U.S. Real Estate Index
• Short Basic Materials (SBM): Linked to the Dow Jones U.S. Basic Materials Index

These three funds join existing ProShares products offering 200% daily leveraged and -200% daily leveraged exposure to the same benchmarks. ProShares has now launched at least 13 new ETF products in 2010, including the company’s first 300% and -300% funds last month.

Read more about each of the new ETF offerings here.

Disclosure: No positions at time of writing.

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PLTM is based on an index that includes global stocks actively engaged in some aspect of platinum group metal (PGM) mining, including refining and production. The underlying index uses a modified linear weighted methodology adjusted by revenue exposure to PGM production, where component securities are grouped into linearly weighted quartiles and then equally weighted within each quartile. Among the 25 component companies are MMC Norilsk Nickel, Johnson Matthey, and Lonmin Plc.

CU will track the ISE Global Copper Index, a benchmark measuring the performance of public companies that are active in the copper mining industry based on analysis of revenue derived from the sale of copper. Components must be actively engaged in some aspect of the copper mining industry, such as copper mining, refining or exploration.

Mining ETFs Take Off

The new funds from First Trust join several existing funds focusing primarily on stocks of global mining companies. More generally, ETFs investing in equities of commodity-intensive companies have seen their popularity surge in recent years, as investors have embraced these funds as an alternative means of gaining commodity exposure. Because the profitability of mining companies and other hard asset producers is often tied to the prevailing market price of the underlying commodity, share prices tend to exhibit a strong correlation with spot price of the related natural resources. Many investors frustrated with the impact of contango on returns to futures-based ETFs have turned to these funds to gain exposure to commodity prices (see an in-depth look at the three ways to play commodities through ETFs in this feature).

Van Eck has established itself as the leader in the space; the Gold Miners ETF (GDX) has more than $5 billion in assets while the Junior Gold Miners ETF (GDXJ) has taken in more than $800 million since its launch just four months ago. The SPDR S&P Metals and Mining (XME) ETF has also accumulated nearly $1 billion in assets. Emerging Global Advisors offers a metals and mining fund focusing on companies in emerging markets (EMT) last year. See all ETFs included in the Commodity Producers Equities ETFdb Category here.

While these more diversified funds include companies engaged in mining of copper and platinum, PLTM and CU are the first ETFs to focus exclusively on these metals. Global X recently filed for approval on four mining ETFs, including gold, silver, platinum, and copper.

Disclosure: No positions at time of writing.

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• First Trust Plans Three New ETFs
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• The Controversy Over Palladium and Platinum ETFs

• Short FTSE/Xinhua China 25 (YXI): This ETF would seek to deliver daily investment results equal to the inverse of the daily change in the FTSE/Xinhua China 25 Index. This index consists of 25 mega-cap Chinese equities, and is the basis for the largest U.S.-listed China ETF (FXI). ProShares already offers 200% and -200% ETFs based on the FTSE/Xinhua China 25 Index (XPP and FXP, respectively).

• Ultra Nasdaq Biotechnology: This ETF would seek daily investment returns equal to 200% of the daily return on the Nasdaq Biotechnology Index, a benchmark tracked by the iShares Nasdaq Biotechnology Index Fund (IBB).

• UltraShort Nasdaq Biotechnology: This ETF would be linked to the same index, seeking to deliver daily returns equal to -200% of the daily change in the index.

• Short Basic Materials (SBM): This ETF would seek to deliver daily returns equal to the inverse of the Dow Jones U.S. Basic Materials Index, a benchmark covered by the iShares Dow Jones U.S. Basic Materials Index Fund (IYM). ProShares currently offers 200% and -200% leveraged ETFs (UYM and SMN, respectively).

• Short Real Estate (REK): This proposed ETF would be designed to deliver daily returns equal to the inverse of the daily return on the Dow Jones U.S. Real Estate Index. ProShares Ultra Real Estate (URE) and UltraShort Real Estate (SRS) both offer leveraged exposure to this index, and the iShares Dow Jones U.S. Real Estate Index Fund (IYR) offers simple 1x exposure.

Leveraged ETF Boom

Already this year, ProShares and Direxion have launched several new products, many of which have seen heavy initial trading volumes. In January, ProShares launched a pair of 200% leveraged Treasury ETFs. The company launched eight more ETFs last month, including funds offering 300% and -300% daily exposure to the Nasdaq 100, Dow Jones Industrial Average, S&P MidCap 400, and Russell 2000.

Direxion has also expanded its product lineup significantly this year, launching the first ETFs offering leveraged exposure to short-term Treasuries in February. Earlier this week, trading began on six new leveraged ETFs from Direxion, including the company’s first 2x and -2x funds. In total, nearly 20 new leveraged ETFs have hit the market already this year.

Disclosure: No positions at time of writing.

Related Stories:

• ProShares Launches First Inverse China, Real Estate, Materials ETFs
• Direxion Launches Leveraged Real Estate ETFs
• ProShares Files For More Leveraged Funds: Will The SEC Oblige?

• PIMCO 0-3 Year Banking Sector Corporate Bond Index Fund: This ETF would be based on an index consisting of investment grade corporate debt securities issued by banking institutions with remaining maturities less than three years. Vanguard currently offers an ETF focusing on short-term corporate bonds (VCSH), but funds targeting debt issues from a specific sector would be an industry first.

• PIMCO 1-5 Year High Yield Corporate Bond Index Fund: This proposed fund would seek to track an index comprised of below investment grade corporate debt (based on the average rating from S&P Moody’s, and Fitch) with at least one year and less than five years remaining until maturity. This fund would also represent a new level of granularity in the fixed income space; holdings of existing junk bond ETFs are spread across the maturity spectrum.

• PIMCO Emerging Markets Aggregate U.S.$ Denominated Bond Index Fund: This ETF would be linked to the BofA Merrill Lynch US Emerging Markets Sovereign & Credit Plus Index, a benchmark comprised of U.S. dollar denominated emerging market and crossover sovereign, quasi-government and corporate debt securities with at least one year remaining term to final maturity. Currently, the iShares JP Morgan Emerging Markets Bond Fund (EMB) and PowerShares Emerging Markets Sovereign Debt Portfolio (PCY) offer exposure to debt issued by governments of the developing world.

• PIMCO High Yield Corporate Bond Index Fund: This fund would track an index consisting of corporate debt securities rated below investment grade (again, based on the average rating of the “big three” ratings agencies) with at least one year remaining until maturity. A high yield bond fund from PIMCO would compete with existing products from State Street (JNK), iShares (HYG), and PowerShares (PHB).

• PIMCO Investment Grade Corporate Bond Index Fund: PIMCO also filed for approval on an ETF that would be linked to the BofA Merrill Lynch U.S. Corporate Index. This benchmark consists of debt securities with an investment grade rating and an investment grade rated country of risk. The iBoxx Investment Grade Corporate Bond Fund (LQD) is currently the most dominant fund in this space, maintaining more than $12 billion in assets.

• PIMCO Build America Bond Strategy Fund: Finally, PIMCO filed for an actively-managed fund focusing on taxable municipal debt securities issued under the Build America Bond program, which was was created as part of the American Recovery and Reinvestment Act of 2009. Under this program, the federal government essentially subsidizes 35% of the interest payments made by municipalities on taxable bonds. For example, if debt was issued with a 10% interest rate, Washington would cover 3.5% of that, thereby reducing financing costs for cash-strapped state and local governments. The Build America Bond program has been somewhat controversial, but very popular with investors (and for good reason as Matt Hougan recently pointed out). PowerShares launched it Build America Bond Portfolio in November, and assets have already grown to more than $180 million in assets.

For more updates on the ETF product pipeline, sign up for our free ETF newsletter.

Disclosure: No positions at time of writing.

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Russia’s Economy

Russia’s commodity-intensive economy was battered during the recent downturn as demand for raw materials and energy resources plummeted. Since bottoming out, however, Russian equities have delivered huge returns, thanks in large part to a surge in demand for materials from China, Brazil, and other emerging markets (see the Top Ten Performing ETFs Since The Market Bottom).

Russia is by far the world’s largest country, covering more than 11% of the earth’s land area. It’s also the largest producer of natural gas and oil and home to massive deposits of countless other resources, including coal, timber, and industrial metals. Natural resources account for a significant portion of Russia’s exports, creating a stock market that is rather volatile, even by emerging market standards. When commodity prices show strength, as they have over the last year, Russian equities tend to surge. But when demand for oil, gas, and metals dips, stiff headwinds to economic growth form.

The Russian economy has become more diversified in recent years as the telecom and financial industries have expanded considerably. In an article titled “Russia Forward!” president Dmitry Medvedev recently conveyed the need to transform the Russian economy by stimulating innovation and generating new technologies. “Should we drag a primitive economy based on raw materials and endemic corruption into the future?” Medvedev wrote in September. The government has devised a plan to develop a Russian technology and innovation hub, although progress towards implementing the vision has been minimal.

But the composition of the index underlying RBL reveals the extent to which the country still depends on commodity-related businesses. The energy sector accounts for about 49% of the benchmark while materials account for another 18%. Financials (12%) and telecom (9%) receive the next-highest weightings.

The risks associated with Russian equities don’t stop with the dependence on commodity prices. Russia consistently ranks as one of the most corrupt nations and received a low “Innovation Score” from the World Economic Forum’s Competitiveness Report. The Russian ruble has been extremely volatile in the past, and legal protections for foreign businesses are perceived as very weak.

Still, the potential for growth in the resource rich nation is attractive to many investors, especially as signs of economic progress and political reform emerge. Yields on Russian dollar bonds recently fell below 5% for the first time as rising oil prices boosted investor confidence. The current yield is about 80 basis points below similar bonds issued by Brazil. Russia is preparing for its first foreign currency bond sale since defaulting on domestic debt and devaluing the ruble in 1998. And despite the recent run-up, the index tracked by RBL remains very attractive from a price-to-earnings perspective; at the end of February forward looking P/E was under 9.

Russia ETF Options

RBL will compete most directly with the Market Vectors Russia ETF (RSX), a fund linked to the DAXglobal Russia+ Index. RBL and RSX will be similar in many ways–both maintain a heavy tilt towards the energy sector–but far from identical. As highlighted in the adjacent table, major differences include the depth of holdings offered, expense ratios, and the weightings given to energy giant Gazprom.

RSX has accumulated more than $1.5 billion in assets, but Russia ETF assets are by far the smallest of any BRIC bloc of countries. China ETFs have aggregate assets of nearly $15 billion, while three ETFs targeting Brazilian equities (EWZ, BRF, and BRXX) have nearly $12 billion. The four India ETFs available to U.S. investors have about $2 billion in assets.

For updates on all new ETF launches, sign up for our free ETF newsletter.

Disclosure: No positions at time of writing.

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Each of the new products is an industry first of some sort. Both ProShares and Direxion offer leveraged products linked to the MSCI Emerging Markets Index, but BRIL and BRIS are the first leveraged ETFs offering exposure to the BRIC economies. INDL and INDZ are the first leveraged ETFs linked to Indian markets, joining funds from both major leveraged ETF issuers based on China indexes. SOXL and SOXS are the first 3x leveraged ETFs focusing on a semiconductor-specific benchmark. There are a number of “plain vanilla” semiconductor ETFs, including SMH, IGW, XSD, and PSI. These 1x semiconductor ETFs have aggregate assets of nearly $1.7 billion and average trading volumes of more than 15 million shares. ProShares already offers both 200% daily leveraged (USD) and -200% daily leveraged ETFs (SSG) linked to the Dow Jones U.S. Semiconductors Index.

“Direxion strives to provide innovative investment solutions that enable investors to employ tactical portfolio strategies amid changing market conditions,” stated Dan O’Neill, Direxion Shares’ President. “We have provided the investment community with many industry ‘firsts.’ With this launch, we are pleased to offer the first 2x leveraged BRIC and India ETFs. The BRIC economies represent some of the fastest-growing in the world, and we are pleased to provide a vehicle for trading in these markets.”

The BRIC and India funds are the first leveraged ETFs offering 2x exposure from Direxion. Historically, the company has dominated the 3x leveraged ETF space while ProShares has focused on inverse and 2x leveraged funds. In recent months ProShares has expanded into the 3x leveraged ETF space, and now Direxion has ventured into offering 2x leverage. Through the first two months of 2010, cash inflows into leveraged ETF products exceeded $1 billion, indicating that these funds remain tremendously popular among a variety of investors.

BRIL and BRIS are linked to the BNY Mellon BRIC Select ADR Index, a benchmark tracked by Claymore’s BRIC ETF (EEB). INDL and INDZ are based on the Indus India Index, which is tracked by the PowerShares India Portfolio (PIN).

Disclosure: No positions at time of writing.

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Many investors are familiar with the Wilshire 5000 Total Market Index, a benchmark used to measure the performance of domestic equity markets. Originally named after the 5,000 stocks included when it was created in 1974, the index currently includes approximately 4,000 U.S. stocks. While many well-known market barometers, such as the Dow Jones Industrial Average, S&P 500, and Russell 1000, consist entirely of large cap stocks, the Wilshire 5000 gives significant weight to smaller firms. Mid cap and small cap stocks make up about 20% and 9%, respectively, of the Wilshire 5000, making it more representative of the broad U.S. stock market.

While the correlation between the Wilshire 5000 and the S&P 500 has historically been very strong, the relative risk and return profiles of these benchmarks are certainly not identical. Over the last year, the Wilshire 5000 has gained about 73%, while the S&P 500 is up about 68% over the same period.

WFVK will compete most directly with existing ETF products from Vanguard, iShares, and Charles Schwab.

The Wilshire 4500 Completion Index ETF is based on a related benchmark that is constructed by removing the 500 stocks in the S&P 500 from the Wilshire 5000 Index. As such, WXSP will maintain minimal exposure to large cap equities (they make up about 4% of the underlying index) while offering significant exposure to both mid caps and small caps (each makes up about 48% of the Completion Index).

The U.S. Real Estate Investment Trust Index ETF is based on another well-known Wilshire index that consists of publicly-traded real estate investment trusts. The Wilshire U.S. Real Estate Investment Trust Index currently consists of about 82 REITs, with about 75% of the benchmark allocated to mid cap and small cap companies.

Beta Focus

The launch of these three funds clearly represents a movement by Claymore to round out its ETF product line by expanding into broad-based domestic funds. Historically, Claymore’s product line has centered around targeted sector and international funds–such as the NYSE Arca Airline ETF (FAA) and Delta Global Shipping Index ETF (SEA)–as well as more funds that rely on proprietary screening methodologies to deliver themed investment plays or identify component companies poised for outperformance (e.g., RYJ and STH).

Over the last year, Claymore has expanded its suite of China ETFs to include the first all cap ETF focusing exclusively on Chinese stocks (YAO) and a fund targeting China’s technology sector (CQQQ). Now the firm, which was acquired last year by Guggenheim, is venturing into the “pure beta” ETF arena that has traditionally been dominated by iShares, Vanguard, and State Street.

“This is an exciting addition to our growing portfolio of ETF products, extending our line-up into broad-based domestic equities.” said William Belden, Managing Director at Claymore. “Leveraging the expertise of Wilshire and their widely followed indexes, investors now have an opportunity to access the U.S. equity and REIT markets with the inherent benefits of ETF investing—efficiency, transparency and flexibility.”

Disclosure: No positions at time of writing.

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The fund would seek to track the Barclays Capital Global Aggregate ex-USD >$1B: Corporate Bond Index, a benchmark designed to be a broad measure of the global investment-grade, fixed rate corporate debt markets outside the U.S. In order to be eligible for inclusion, securities must be rated investment grade by at least two ratings agencies, have a minimum $1 billion market capitalization, and have at least one year remaining until maturity. Excluded from the index are subordinated debts, convertible securities, floating-rate notes, fixed-rate perpetuals, warrants, linked bonds, structured products, and Swiss Franc denominated debt.

The proposed fund would represent a mix of two of the hottest investment trends of the last year: international and fixed income investing. In 2009, international equity funds saw more than $35 billion of cash inflows, while fixed income funds raked in $42 billion.

For many years, the iBoxx $ Investment Grade Corporate Bond Fund (LQD) thrived as the only true investment grade corporate bond ETF. LQD currently has more than $12 billion in assets, a clear indication that investors have embraced ETFs as a way to achieve fixed income exposure. Vanguard has introduced targeted corporate bond ETFs in recent months (VCSH, VCIT, VCLT), but all current corporate bond ETF offerings are limited to U.S. securities (see a complete list in the Corporate Bonds ETFdb Category). A handful of international bond funds have popped up, but these primarily focus on Treasuries issues by foreign governments.

No expense ratio was included in the filing. See the complete prospectus here, and sign up for our free ETF newsletter to receive regular updates on new product offerings.

Disclosure: No positions at time of writing.

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Claims of saturation in the ETF industry have some merit. In recent years, ETF issuers have rushed products to market under the assumption that exposure to a unique market or sector would result in sufficient demand. There are more than 250 ETFs with less than $20 million in assets, many of which have been around for several years. The economics of an industry that has boomed in large part because of ultra-low expense ratios are challenging, meaning that for many of these smaller ETFs, the days are numbered.

But there are a lot of good ideas out there that haven’t been executed. Last month, we lamented that there is still no exchange-traded product offering targeted exposure to either the domestic or international automotive industry (the most effective play may actually be through platinum and palladium ETFs). This month, we make a case for the ultimate equal-weighted ETF as a potential alternative to cap-weighted products that dominate so many investor portfolios.

RSP + EQL = ???

While the bulk of equity ETF assets are in funds that are linked to market capitalization-weighted benchmarks (such as the S&P 500 or Russell 3000), a number of products offering alternative weighting methodologies have popped up as well (see a closer look at all of these strategies here). The Rydex S&P Equal Weight ETF (RSP) is one fund that has seen its popularity surge, nearly tripling its assets over the last year. RSP tracks the S&P Equal Weight Index, which includes all constituents of the S&P 500 in equal weights. As such, RSP is (to some extent) “market cap blind” in that it isn’t dominated by a handful of mega-cap equities. Moreover, an equal weighting methodology avoids the primary drawback of cap-weighting: the tendency to overweight overvalued stocks and underweight undervalued stocks.

Another interesting fund is the Equal Weighted Sector ETF (EQL), which invests in equal proportions in the nine Select Sector SPDRs. So the allocation to energy is the same as the weight given to technology, industrials, and materials. By giving an equivalent allocation to each sector, EQL limits the extent to which a crash in a specific part of the economy (such as technology in the early 2000s or financials in 2008) adversely impacts value. Moreover, this strategy provides the opportunity to participate in a rally in sectors ignored by the S&P 500 (such as materials, telecom, or utilities, which each account for less than 5% of the S&P 500). See Why EQL May Be A Better S&P 500 ETF Than SPY for more on this fund.

Both of these strategies have some clear advantages over traditional cap-weighted ETFs that . So why not combine the two to make the ultimate equal weighted S&P 500 ETF? Each sector would be given an equal weight (a la EQL) and component companies within each sector would be weighted equally as well (a la RSP). Constructing such an ETF wouldn’t be all that challenging, as Rydex already offers a line of nine equal-weighted sector funds. But it could potentially be a big hit with investors looking for an alternative to SPY.

For more ideas on potential additions to the ETF universe, see Ten ETFs Than Don’t Exist, But Should. For more insights into the ETF industry sign up for our free ETF newsletter.

Disclosure: No positions at time of writing.

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• Ultra MSCI Brazil: Seeks daily returns equal to 200% of the daily returns on the MSCI Brazil Index.
• Ultra Pacific ex-Japan: Seeks daily returns equal to 200% of the daily returns on the MSCI Pacific ex-Japan Index.
• Ultra MSCI Europe: Seeks daily returns equal to 200% of the daily returns on the MSCI Europe Index.
• Ultra MSCI Mexico Investable Market: Seeks daily returns equal to 200% of the daily returns on the MSCI Mexico Investable Market Index.

In June 2009, ProShares launched UltraShort products that seek to deliver 200% of the inverse of daily returns of the same four indexes. iShares currently offers ETFs designed to replicate the performance of three of these benchmarks, including EWZ (Brazil), EPP (Pacific ex-Japan), and EWW (Mexico). The Vanguard European ETF (VGK) is linked to the MSCI Europe Index.

Leveraged / Inverse Regional Banking ETF

In addition to the four 200% long international ETFs, ProShares has three funds based on the KBW Regional Banking Index in the works:

• Ultra KBW Regional Banking (200% daily exposure)
• Short KBW Regional Banking (-100% daily exposure)
• UltraShort KBW Regional Banking (-200% daily exposure)

The KBW Regional Banking Index is an equal-weighted benchmark consisting of companies that do business as regional banks or thrifts. State Street’s KRE, which is designed to track the performance of this index, has been one of the best-performing ETFs to date in 2010, gaining more than 10% on the year. This impressive performance comes after this sub-industry missed out on last year’s rally: KRE was one of the worst-performing equity ETFs last year.

Already this year more than 20 banks have been closed, and FDIC officials said that the pace of bank seizures is likely to accelerate in coming months. The number of banks on the “problem” list increased to 702 in the fourth quarter from just 552 three months earlier (read more on regional bank ETF options in this feature).

If approved and launched, thees funds would join existing ETFs offering leveraged exposure to the broad financial sector. ProShares’ lineup includes ETFs providing 200% (UYG), -200% (SKF), and -100% (SEF) daily exposure to the Dow Jones U.S. Financials Index. Direxion’s Daily Financial Bull 3x Shares (FAS) and Bear 3x Shares (FAZ), which are based on the Russell 1000 Financial Services Index, are two of the most widely-traded ETFs, with average daily volumes of about 30 million shares and 61 million shares, respectively.

Expense ratios for all of the new ETFs are pegged at 0.95%, consistent with existing ProShares products.

Disclosure: No positions at time of writing.

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