Understanding the ProShares Ultra FTSE China 50 ETF (XPP)

What this ETF is trying to do

The ProShares Ultra FTSE China 50 (XPP) is an ETF traded on the NYSE. It is designed to track the performance of a specific index related to large Chinese companies.

What the numbers show

The data shows that XPP has experienced a significant share-price decline recently. For example, the one-year price return was approximately -34.65%. The year-to-date (YTD) price return is approximately -26.44%.

When looking at longer periods, the three-year price return was approximately 18.27%. However, over a five-year period, the total return was approximately -58.40%.

It is important to understand the difference between price return and total return:

• Price Return: This measures only the change in the share price.

• Total Return: This includes both the share price changes and any distributions (cash payments) received.

For XPP, the total returns are slightly different from the price returns. For instance, the one-year total return was approximately -32.87%, while the one-year price return was -34.65%.

Income and distribution explanation

XPP provides cash distributions to investors. The distribution yield is approximately 3.00%. Over the last 12 months, there were 4 distributions, and they usually occur on a quarterly basis. The trailing distributions amount was approximately $0.58 per share.

NAV erosion explanation

The supplied data is sufficient to evaluate price erosion, but it does not include enough historical NAV-per-share data to confirm or rule out NAV erosion.

However, the data does show significant price-based risks. XPP has a severe erosion-risk flag. This means the split-adjusted price trend and the erosion score triggered a warning. The fund has an erosion score of 30, which is labeled as "Significant price erosion" with a severity level of "significant."

Pros

• The fund has shown a positive three-year total return of approximately 28.57%.

• It provides regular quarterly distributions.

Cons

• The fund has experienced a significant share-price decline over the last year.

• There is a severe erosion-risk flag due to significant price erosion.

• The five-year total return is significantly negative at approximately -58.40%.

Beginner takeaway

When researching XPP, it is important to look at both the distributions and the share price. While the fund pays a distribution yield of about 3.00%, this income has been accompanied by a large decline in the share price over the last year. High yields can sometimes be misleading if the underlying share price is falling significantly. Always remember that past performance, such as the three-year gains, does not guarantee future results.