ProShares Trust Short MSCI Emerging Markets (EUM) seeks to provide inverse (-1x) daily performance of the MSCI Emerging Markets Index, which measures the stock performance of large- and mid-cap companies across 24 emerging market countries including China, India, Taiwan, and Brazil.
How It Works
EUM uses derivatives like swaps and futures contracts to achieve inverse exposure to emerging markets equities without directly shorting stocks. The fund rebalances daily to maintain -1x leverage, meaning it aims to gain 1% when the underlying index falls 1%. As an inverse ETF, it profits from declining emerging market stock prices while providing currency-unhedged exposure to multiple emerging market currencies.
Key Features
- Provides inverse exposure to 24 emerging markets including China, India, and Brazil without requiring margin account for short selling
- Daily rebalancing maintains precise -1x leverage, making it less volatile than leveraged inverse products but still unsuitable for long-term holding
- Currency-unhedged structure means returns affected by both stock performance and emerging market currency movements against the dollar
Risks
- This ETF loses value when emerging markets rise, potentially declining 20-30% during strong emerging market rallies like those seen in recovery periods
- Daily rebalancing causes compounding decay over time—holding for weeks or months typically results in losses even if markets move sideways
- Currency risk amplifies volatility as emerging market currencies can swing 10-20% against the dollar, affecting returns beyond stock movements alone
Who Should Own This
Designed for sophisticated traders with high risk tolerance seeking short-term (hours to days) hedging against emerging market exposure or tactical bearish bets. Requires daily monitoring and should represent less than 5% of portfolio. Unsuitable for buy-and-hold investors due to daily reset mechanics and compounding decay.