ProShares Short Financials

ProShares Short Financials (SEF) aims to deliver the opposite (-1x) of each day's return on the S&P Financial Select Sector Index, which tracks the S&P 500's banks, insurers and other financial firms. It uses swap contracts, not stocks, and unlike -2x and -3x inverse financials funds, adds no leverage. It is designed for short-term trading: over the 10 years to December 31, 2025, it lost an average of 12.46% a year.

• Over the year to Oct 27, 2026, SEF returned -1.8%, 1st of 3 among similar funds.
• Its 5-year annualized return was -5.7% and its 10-year -11.9%.
• In the 2020 COVID crash, while stocks fell, it gained 59.3%.
• Its worst full calendar year was 2009 (-41.6%); its best was 2022 (+11.8%).
• The deepest fall in its price history was 96.6% (Mar 6, 2009 to Sep 3, 2026), not yet recovered.

As of Aug 31, 2026, most of the fund sat in cash, Treasury bills and money-market holdings (84.45% of net assets), with its inverse exposure coming from 8 swap and futures positions rather than from owning the stocks outright.

• Over the three months to Aug 31, 2026, investors withdrew a net $795K (creations minus redemptions, per the N-PORT report).
• Monthly total returns reported for that quarter: -3.83%, -5.44%, -0.88%.

SEF bets against the S&P Financial Select Sector Index from S&P Dow Jones Indices. The index covers the S&P 500's banks, insurers, consumer lenders, capital markets and financial services firms, and mortgage REITs (real estate investment trusts that hold mortgages). It is weighted by market value, so bigger companies count more. The index is reviewed each September, with weight adjustments in March, June and December.

SEF gets its exposure from derivatives, not stocks. ProShare Advisors uses a mathematical approach to set a mix of swap agreements. These are contracts, mainly with large financial institutions, that pay the fund when the index falls and cost it when the index rises. As of August 31, 2026, about 84% of the fund's $13.0 million in net assets sat in cash and 13% in repurchase agreements (short-term loans backed by securities), alongside eight derivative positions, including total return swaps.

Each day the fund rebalances to hold its exposure at -1x. It trims its short position after the index rises and adds to it after a fall. Because of this daily reset, returns over weeks or years can stray far from -1x the index, usually for the worse when prices swing up and down. Fees and swap financing costs also cut returns. The prospectus warns that an index jump approaching 100% in one day could wipe out the investment.

• SEF charges 0.95% a year.
• Of that, 0.75% is the management fee; the rest covers other fund expenses.
• The fee includes a 0.63% waiver from the adviser, which may end.
• Using the prospectus's standard example, $10,000 invested would cost about $97 in the first year and $1,825 over 10 years (assuming a 5% annual return).

SEF resets its -1x exposure daily and is designed for short-term trading, and holding it for years has produced deep, lasting losses.

SEF has gained when financial stocks slumped: 59.3% in the 2020 COVID crash and 26.8% in the 2022 bear market. Figures for the 2008 crisis aren't available. Between slumps it has lost ground. Its worst calendar year was 2009, down 41.6%. From March 6, 2009, to September 3, 2026, it fell 96.6%, with no recovery by October 27, 2026. Holding it to have something to draw on in a bad year means absorbing losses in most other years.

Its income over the 12 months to October 27, 2026, was $0.91 a share, a 3.01% yield, paid quarterly. Even so, total returns were negative in eight of the ten calendar years from 2016 through 2025. Its expense ratio, the yearly cost taken from fund assets, is 0.95% after a fee waiver. Past results don't predict future returns, and a plan should weigh the whole portfolio, not one fund.

Matched by leveraged/inverse funds on the same index (financials), same direction.