With a digital transformation in shopping, bricks-and-mortar retailers are struggling. Feeble sales are forcing them to shut stores or file for bankruptcy, while e-commerce retailers are making hay.

In order to capitalize on this trend, ProShares has launched two retail disruption ETFs, namely ProShares Decline of the Retail Store ETF and ProShares Long Online/Short Stores ETF, designed to benefit from the move toward online shopping and shift from physical retail stores. Here’s an insight into these newly created ETFs:

EMTY in Focus

This fund seeks capital appreciation from the decline of bricks and mortar retailers through short (inverse) exposure to the Solactive-ProShares Bricks and Mortar Retail Store Index, which consists of retailers that rely principally on revenues from physical stores. The index holds a well-diversified basket of 56 stocks, with none accounting for more than 1.79% of assets. From an industrial exposure, apparels takes the largest share at 28.6% followed by department stores at 10.7%.

The new fund comes with an expense ratio of 0.65%.
CLIX in Focus

This fund seeks to benefit from both outperforming online and underperforming physical retailers through long/short strategy. It combines the 100% long position in retailers that primarily sell online or through other non-store channels with a 50% short position in those that rely principally on physical stores by tracking the performance of the ProShares Long Online/Short Stores Index.  

The approach reduces equity market exposure and results in less volatility than long-only equity strategies. The ETF charges 65 bps in annual fees from investors.

How do they fit in today’s portfolio?

The ETFs could intrigue investors seeking to benefit from the changing retail landscape from physical stores to online. This is especially true given that bricks-and-mortar retailers are seeing a decline in revenue and profit margins to levels not seen since recession. Over 30 major retailers have declared bankruptcy in the past three years and more than 8,600 retail stores could close this year in the United States. Additionally, major players like J.C. Penney (JCP – Free Report) and Macy’s (M – Free Report) are struggling to remain viable.

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