Professional Documents
Culture Documents
INVESTMENTS
Understanding their role in a portfolio
2,500
2,000
1,500
1,000
500
0
1975
1979
1984
1988
1993
1997
2002
2007
2011
So what should we expect from the marketa relatively smooth ride or a rocky one?
100%
91%
91%
85%
80%
80%
60%
40%
20%
0%
1900
1910
1920
1930
1940
1950
1960
1970
1980
1990
2000
2010
A BETTER PATH
Its not always 76 degrees in Miami, and portfolios dont
more than made up for his loss in year two, and that his
Investor A
Investor B
30%
19.1%
6%
6%
8%
6%
12.3%
6%
6%
6%
4%
-20%
Year 1
Year 2
Year 3
Cumulative Return
Annualized Return
TRUE DIVERSIFICATION?
CORRELATION TELLS THE STORY
1.0
1.00
0.8
0.5
market stocks, and bonds. But how much diversification do these asset
classes really provide? The concept of correlation sheds some light on
-0.4 this.
-0.5
Asset A
1.0
1.0
Asset C
(Low)
Better diversification
Asset B
(High)
0.5
Asset C
(Low)
0.3
Asset D
(Negative)
0.8
Asset B
(High)
Lower correlation
Asset A
0.0
Asset D
(Negative)
-0.4
-0.5
For example, if you were looking for a diversifier for Asset A in your portfolio, Asset C and
Asset D would be much better choices than Asset B.
IN DIFFERENT MARKETS,
CORRELATION CHANGES
For many years, combining a variety of equity asset
effective diversifiers.
needed most.
Overall
Down Markets
1.25
1.00
1.00
1.00
0.83
0.75
0.87
0.75
0.85
0.73
0.79
0.50
0.25
0.18
0.00
-0.16
-0.25
Large Cap Stocks
(S&P 500)
International Stocks
(MSCI EAFE)
U.S. Bonds
(Barclays U.S. Agg. )
ALTERNATIVE INVESTMENTS
Alternative Asset Classes
Alternative Strategies
Real estate
Commodities
Precious metals
Currencies
Volatility
Private equity
Geared investing
- Leveraged investing
- Inverse investing
Long/short strategies
Market neutral
Absolute return
Convertible/merger arbitrage
Managed futures
Global macro
potential.
1.00
1.00
Alternative
1.00
0.84
0.82
0.77
0.77
0.50
0.22
0.04
0.00
0.00
-0.10
-0.50
-0.72
-1.00
-1.00
2x Geared
Large Cap
Stocks
Large Cap
Stocks
Small Cap
Stocks
International
Stocks
Hedge
Funds
Emerging
Market
Stocks
Global
Bonds
U.S.
Bonds
Managed
Futures
Currency
Volatility
-1x Geared
Large Cap
Stocks
2x Geared Large Cap Stocks = 2x daily S&P 500; Large Cap Stocks = S&P 500; Small Cap Stocks = Russell 2000; International Stocks = MSCI EAFE; Hedge
Funds = HFRI Fund-Weighted Composite; Emerging Market Stocks = MSCI Emerging Markets; Global Bonds = Barclays Global Agg.; U.S. Bonds = Barclays U.S. Agg.;
Managed Futures = Barclay CTA; Currency = U.S. Dollar Index; Volatility = CBOE VXO/VIX (VXO from 12/19929/2003, VIX from 10/200312/2012); -1x Geared
Large Cap Stocks = -1x daily S&P 500
A broader menu
Adding variety
prepare for the storms before they hit. The good news
ever before.
10
ARE ALTERNATIVES
APPROPRIATE FOR YOU?
At this point, you may be wondering where and how you can get access
to alternatives and if these investments are even appropriate for you.
D
o you have enough investments that are likely to go
11
GLOSSARY OF TERMS
Absolute return strategies seek to provide positive returns in
such as the dollar, the euro, the yen, the Swiss franc, etc.
remove all directional market risk by being equally long and short.
12
ABOUT US
ProShares, founded in 2006, offers the nations largest lineup of alternative ETFs. We enable investors to go beyond
the limitations of conventional investing and meet todays market challenges. We help investors build better portfolios
by providing access to alternative investments delivered with the liquidity, transparency and cost effectiveness of an
ETF. ProShares lineup includes Global Fixed Income, Hedge Strategies, Geared (leveraged and inverse), and Inflation
and Volatility ETFs. ProFunds was founded in 1997 and offers over 100 mutual funds.
All investing involves risk, including the possible loss of principal. ProShares and ProFunds entail certain risks, including risk associated
with the use of derivatives (swap agreements, futures contracts and similar instruments), imperfect benchmark correlation, leverage and
market price variance, all of which can increase volatility and decrease performance. ProShares are generally non-diversified. There is no
guarantee any fund will achieve its investment objective. Past performance is no guarantee of future results. Diversification may not
protect against market loss.
Carefully consider the investment objectives, risks, charges and expenses of ProShares and ProFunds before investing. This and
other information can be found in their summary and full prospectuses. Read them carefully before investing. For a ProShares ETF
prospectus, visit ProShares.com or obtain one from your financial advisor or broker/dealer representative. For a ProFunds mutual
fund prospectus visit ProFunds.com.
ProShares ETFs are distributed by SEI Investments Distribution Co., which is not affiliated with the funds advisors. ProFunds Distributors, Inc. is
distributor for ProFunds mutual funds.
Data source for charts: Bloomberg. Annualized stock market return based on the S&P 500s price index. Historical correlation statistics based on
the median of annual correlations rolled monthly. Source: Nations largest lineup of alternative ETFs: FRC, as of March 31, 2013.
2013 PSA/PFA 2013-4616