New Securities Track Movement of U.S. Home Prices

MarketWatch reported that investment manager MacroMarkets on Tuesday launched exchange-traded products on the NYSE Arca designed to track housing values. MacroShares Major Metro Housing Up (ticker: UMM) and MacroShares Major Metro Housing Down (DMM) are benchmarked to the S&P/Case-Shiller Composite-10 Home Price Index, which is a weighted measure of home price changes in the following metropolitan areas: Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco, and Washington, D.C.

A MacroMarkets press release said WisdomTree Asset Management will provide educational and product support for the offerings.

The MacroShares Major Metro Housing Up is designed to rise when U.S. housing prices climb. Its counterpart, MacroShares Major Metro Housing Down, profits when real estate values fall. The paired securities will feature a 300% leverage factor, MarketWatch reported.

Unlike most exchange-traded funds, the MacroShares do not invest directly in an underlying asset such as stocks, bonds or commodities futures. Instead, MacroShares are issued in pairs, and an equal number of shares for each fund are created. The funds invest in short-term Treasury securities and overnight repurchase agreements.

The paired trusts have a binding agreement to pledge assets to one another over time, based on the movement of housing prices. This transfer of Treasury securities back and forth between the funds changes their values and gives investors exposure to the direction of U.S. home prices, the news report said.

The structure resembles a see-saw as the assets are shuffled between the paired trusts, and has also been compared to total-return swaps, according to MarketWatch.