EUM
1x Short
ProShares Short MSCI Emerging Markets
Shorts: Emerging Markets (EEM)
Expense Ratio
0.95%
Leverage
1x Inverse
Issuer
ProShares
Inception
Oct 2007
Inverse ETF Risk
EUM is an inverse ETF designed for short-term hedging and trading. It resets daily and may not track the inverse of its index over longer periods.
What EUM Shorts
The ProShares Short MSCI Emerging Markets ETF (EUM) aims to provide the inverse (-1x) of the daily performance of the MSCI Emerging Markets Index. This index tracks large- and mid-cap stocks across over 20 emerging market countries.
EUM uses financial derivatives like swaps and futures to achieve its daily inverse exposure. It is designed for short-term trading or hedging and resets its exposure daily, which can cause compounding effects over longer periods.
Key Risks
- Daily Holding Risk: Returns over periods longer than one day can deviate significantly from the inverse of the index's return due to compounding.
- Derivatives Risk: The use of swaps, futures, and other derivatives introduces counterparty risk and potential tracking error.
- Emerging Markets Risk: The underlying markets carry higher political, economic, currency, and liquidity risks than developed markets.
- High Expense Ratio: At 0.95%, the cost is high for an ETF and can erode returns over time.
- Short-Term Focus: The fund is not suitable for long-term buy-and-hold investing.
Best Use Cases
- Short-Term Hedging: Investors with a concentrated long position in emerging market stocks can use EUM as a temporary hedge against a market downturn.
- Tactical Bearish Bet: Traders with a strong short-term conviction that emerging markets will decline can use EUM to express that view.
- Portfolio Diversification: As a limited, tactical tool to potentially reduce overall portfolio correlation during specific market stress periods.
Similar Instruments
Frequently Asked Questions
Is EUM a good long-term investment?
No. EUM is designed for daily results. Due to compounding, its performance over weeks, months, or years will almost certainly not match the inverse performance of its underlying index over that same period. It is unsuitable for long-term holdings.
What is the difference between EUM and EEV?
Both are ProShares inverse ETFs for emerging markets, but they offer different levels of leverage. EUM seeks a -1x daily return, while EEV seeks a -2x (UltraShort) daily return, making it more volatile.
How can I use EUM to hedge my portfolio?
An investor with significant exposure to emerging market funds (like EEM or VWO) could allocate a small percentage to EUM as a tactical hedge. If emerging markets fall, the gain in EUM would help offset some losses in the core holdings. This requires active management and precise sizing.