ProShares Credit Suisse 130/30 (CSM)
ProShares Credit Suisse 130/30 (CSM)
Providing access to advanced investment strategies
The First 130/30 ETF
Based on the first 130/30 index
Institutional investors have used 130/30 investment strategies for a number
of years. Now, with ProShares Credit Suisse 130/30 (CSM), investors have ETF
access to a 130/30 strategy.
CSM seeks to track the first-ever 130/30 index—the Credit Suisse 130/30 Large-Cap Index.
The index was designed by recognized experts in quantitative finance: Andrew W. Lo, PhD, world-
renowned MIT Professor, and Pankaj N. Patel, CFA, Managing Director and Head of the Credit Suisse
Quantitative Equity Research Group, a highly regarded provider of quantitative investment strategies.
A 130/30 strategy aims to outperform an index benchmark 130/30 structure can strengthen the overall investment impact
by taking advantage of both negative and positive expecta- of the portfolio. In theory, a 130/30 strategy can provide
tions for stocks. How? Using limited shorting and leverage. a more efficient portfolio† with the potential for risk-adjusted
A 130/30 sells short 30% of the portfolio. The proceeds outperformance of its long-only index benchmark.
are used to increase long positions to a total of 130%. In the
Of course, the ability of a 130/30 strategy to provide excess
resulting portfolio, the 30% short position offsets the 130% long
returns versus its index benchmark depends on the effectiveness
position, for a net market exposure of 100%—comparable to
of its stock ranking system (or the stock forecasting ability of its
the 130/30’s long-only index benchmark.
manager), as well as on the strength of its investment process.
Shorting helps a 130/30 increase the potential benefit from If the return forecasts for the stocks in a 130/30 portfolio are
stocks with negative expected alphas†. And with the proceeds incorrect, or if the investment process is flawed, a 130/30
from shorting, a 130/30 can take larger overweight posi- strategy could in fact show increased potential to underperform
tions in stocks with positive expected alphas. This means the rather than outperform its index benchmark.
■ Leveraged Long Positions ■ Long Positions ■ Short Positions
$100 100% 100%
$100 investment $30 Buy long $30 30% Net 100%
(using proceeds market exposure
Sell short $30 from short sales) 130/30 portfolio Target Beta =1
For illustrative purposes only. A 130/30 strategy involves costs that are potentially higher than traditional long-only strategies, including short sales
costs and transaction costs attributable to the higher turnover required to maintain 30% short and 130% long positions.
The First Strategy Index of Its Kind
Andrew Lo, PhD, and Pankaj Patel, CFA, recognized that, with advances in risk management, trading
and portfolio construction, an active 130/30 investment strategy could be expressed in an index format.
By replicating a 130/30 strategy, following a transparent and disciplined process, they created the first
130/30 strategy index, the Credit Suisse 130/30 Large-Cap Index.
The Credit Suisse 130/30 Index: A Disciplined and Risk-Managed Monthly Investment Process
1. Establish Universe: Take largest 500 U.S. stocks; exclude low-priced (under $5) and low-volume stocks.
Every third Friday of the month
2. Calculate Expected Alpha† Scores: An expected alpha score is calculated for each
stock in the Universe, applying Credit Suisse’s widely-used model of 10 composite factors.1
3. Optimize Portfolio†: An efficient portfolio (with 130% long and 30% short positions) is
generated based on the expected alpha† scores for each stock.2
4. Apply Equity Weights: The optimized portfolio is then implemented. The portfolio’s target
130/30 structure is restored.
The 10 composite factors fall into five categories: value, growth, profitability, momentum and technical.
The portfolio is constrained so that the maximum active weight for each stock is ± 0.40%. Annual portfolio
turnover is limited to 100%. The expected beta† for the portfolio is set to 1, in line with the investment Universe.
With CSM, investors have access to an innovative 130/30 strategy index—an index that aims to outperform
traditional long-only large-cap indexes, with comparable volatility and, of course, a target beta† of 1.
Convenience: Implementing a 130/30 strategy is operationally complex and can be prohibitively
expensive—even for many large institutions. CSM gives investors the potential benefits of a 130/30
strategy in a single ETF investment.
Lower Cost: CSM, with an expense ratio of 0.95%, offers a relatively low cost approach to 130/30 investing.
For definitions of terms refer to back cover Glossary.
It is not possible to invest directly in an index. This fund seeks investment results that correspond to the index performance, before fees and expenses.
This fund may not be suitable for all investors. Investing involves risk, including the possible loss of principal. The investment return and principal value of
an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. This ETF may involve certain
costs and risks, including aggressive investment techniques (futures contracts, swap agreements and similar instruments), correlation and market price
variance risks. Short positions lose value as security prices increase. Leverage can increase market exposure and magnify investment risk. In addition, this
fund is non-diversified. These risks can increase volatility and decrease performance. See the prospectus for a more complete description of risks. There is
no guarantee any ProShares ETF will achieve its investment objective.
Visit 13030ETF.com for more information, or
call ProShares at 866.PRO.5125 (866.776.5125).
Alpha – A measure of the risk-adjusted return of an investment in relation to its benchmark index. If a stock’s return is higher
than its benchmark, given the same amount of risk, the stock has a positive alpha; if its excess return is lower, it has a negative
alpha. Expected alpha is the forecasted return of an investment, adjusted for its anticipated risk.
Beta – A measure of an investment’s price variability, relative to its market. A security with a beta of 1.5, will move, on average,
1.5 times its market return less the risk-free rate [1.5 (Rm- Rf)].
Example: Consider a large-cap stock with an expected beta of 1.5, and assume a risk-free interest rate of 0%. If the
market were to gain 2% over the risk-free rate, the stock’s expected return (with no alpha) would be 3% (2% x1.5 = 3%).
If the anticipated return for this stock were 4%, it would show positive expected alpha. Alternatively, if the market were to
lose 2%, the stock’s expected return (with no alpha) would be -3% (-2% x1.5 = -3%). If the anticipated return for this stock
were -2%, it would show positive expected alpha.
Efficient Portfolio – A portfolio that provides the greatest expected return for a given level of risk. An efficient portfolio is mathemati-
cally calculated and takes into account the expected return and risk for each security in the portfolio.
Portfolio Optimization – The process of building an efficient portfolio so that its expected return is maximized for a given risk level.
Carefully consider the investment objectives, risks, charges and expenses of ProShares. This and other information is contained in
their summary and full prospectuses, which should be read carefully before investing. To obtain them, contact your financial adviser
or broker/dealer representative or visit 13030ETF.com or proshares.com.
The Credit Suisse 130/30 index is designed to replicate an investment strategy that establishes either long or short positions in certain of the 500 larg-
est U.S. market cap equities (the “Universe”). Short positions will approximate 30% of index portfolio value. Short sale proceeds are used to purchase
30% more in long positions using leverage. There is no guarantee index methodology will result in returns exceeding the index Universe returns. It is not
possible to invest directly in an index.
“Credit Suisse” and “Credit Suisse 130/30 Large-Cap Index™” are trademarks of Credit Suisse Securities (USA) LLC or one of its affiliates and have been licensed
for use by ProShares. ProShares have not been passed on by Credit Suisse or its affiliates as to their legality or suitability. ProShares are not sponsored, endorsed or promoted
by Credit Suisse or its affiliates, and they make no representation regarding the advisability of investing in ProShares. CREDIT SUISSE AND ITS AFFILIATES MAKE NO
WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO PROSHARES.
ProShares are brought to you by ProFunds Group, which includes ProFunds mutual funds and ProShares ETFs. ProShares ETFs are distributed by SEI
Investments Distribution Co., which is not affiliated with ProFunds Group, Credit Suisse, or their affiliates. © 2009 PSA 2009-5479
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- ProShares Credit Suisse 130/30 (CSM)