ProShares RAFI Long/Short (RALS)
RALS Objective
ProShares RAFI® Long/Short ETF (RALS) seeks investment results, before fees and expenses, that track the performance of the RAFI US Equity Long/Short Index.
What is the RAFI US Equity Long/Short Index?
ProShares RAFI Long/Short ETF is benchmarked to the RAFI US Equity Long/Short Index (Bloomberg Ticker "RAFILS"). The index allocates an aggregate equal dollar amount to both long and short equity positions. This allocation is based on a comparison of Research Affiliates Fundamental Index® (RAFI) weightings with traditional market capitalization weightings.
Using Fundamentals to Create an Alternative Investment
The RAFI US Equity Long/Short Index is designed to generate an absolute return over a full market cycle. The Index uses a proprietary methodology developed by Rob Arnott and Research Affiliates that combines the logic of the Research Affiliates Fundamental Index approach with the diversification of a long/short strategy. The RAFI approach uses fundamental measures of company size—sales, dividends, cash flow and book value—instead of market capitalization to select and weight securities. By breaking the link between price and weight, the methodology lessens the influence of market factors that cause prices to deviate from their intrinsic value.
The RAFI US Equity Long/Short Index uses the RAFI methodology to identify securities whose market capitalization weights have deviated from their fundamental weights. It seeks to capitalize on these differences by taking long positions in stocks that may be underweighted by market capitalization indexes, while taking short positions in stocks that may be overweighted by market capitalization indexes.
Potential Benefits
- Alternative strategy—designed to deliver absolute return over a full market cycle
- Diversification—may be largely uncorrelated to traditional asset classes
- Fundamental Index® approach—Rob Arnott's proprietary strategy designed to capitalize on market inefficiencies
Potential Risks
- Index performance—there are no guarantees or assurances that the fund or its benchmark index will achieve intended objectives
- Short exposure—derivatives used to seek short exposure may increase volatility and decrease performance under certain market conditions
- For more risks, see the prospectus