Model mangers TruePath Financial added ProShares UltraShort MSCI Europe (EPV) to their Archipelago model (performance above) last week. EPV attempts to deliver results equal to two times the inverse of the MSCI Europe Index, which measures the equity market performance of developed markets in Europe including France, Germany, Greece, Spain and Ireland.
Choosing an inverse ETF generally represents a bearish sentiment on the underlying index. With the economic problems facing many of the countries featured on EPV’s underlying index, that certainly makes sense.
Of course, not everyone sees Europe’s economic concerns as a nail in the MSCI Europe Index’s coffin. News in November about Spain’s 2nd largest bank buying a 25 percent stake in a Turkish bank to help take advantage of Turkey’s potential growth had some hopeful of an uptick in the index, which would hurt EPV.
On January 14th, Morningstar.com showed EPV trading at a discount to NAV. Over the past six months the fund’s performance has been weak as MSCI Europe rose – EPV has fallen from a July 14th closing price of $21.15 to a January 14th closing price of $13.52. But for those who think Europe’s credit woes and equity markets will only worsen in 2011, that may be a good thing since this lower price might represent an opportunity to buy.
*Charts and prices courtesy of Yahoo Finance and MSCIbarra.com.
