With ETFs, Innovation Breeds More Risk

Ordinary investors lose on products designed for pros
Photograph by Scott Eells/Bloomberg

If you are truly convinced that the price of crude oil will rise today and U.S. stocks will fall, FactorShares 2X: Oil Bull/S&P500 Bear is for you. The exchange-traded fund uses futures to deliver double the daily change in the difference between the price of oil and stocks. “That product represents the result of a lot of feedback from institutional investors, including hedge fund managers, about how an ETF could assist them in implementing their investment strategies,” says Stuart Rosenthal, chief executive officer of New York-based Factor Advisors, which offers the fund.

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