Explore the Secrets of Equities in Rising Rates

May 10, 2022

ProShares Equities for Rising Rates ETF is built on a strategy specifically designed to potentially outperform traditional U.S. large-cap indexes during periods of rising rates. That’s because its underlying index is:

EQRR Companies Sectors Index

Built to Outperform as Rates Increase

EQRR's underlying index, Nasdaq U.S. Large Cap Equities for Rising Rates Index, has significantly outperformed the S&P 500 after the yield on the 10-yr Treasury started rising during the summer of 2020.

Outperform Rates Increase Chart

Source: ProShares and Bloomberg, 8/4/20-12/31/22. Index information does not reflect any management fees, transaction costs, or expenses. Indexes are unmanaged, and one cannot directly invest in an index. Performance over different market conditions and time periods will likely provide different results. Past performance is no guarantee of future results.

A Rules-Based Approach

EQRR tracks the Nasdaq U.S. Large-Cap Equities for Rising Rates Index, which is built using a rules-based engine designed to target sectors that have outperformed as interest rates climb.

1. Focused On 5 Sectors with Outperformance Potential

The index first targets the five sectors that have had a tendency to outperform when rates rise – those sectors that have demonstrated the highest correlation with the 10-year U.S. Treasury yield over the prior 36 months. The sectors with the highest correlations receive the highest weighting.

Three-year Average Correlation of S&P 500 Sectors to Rising 10-year Treasury Rates

Source: Bloomberg, as of 12/31/22. Sectors based on GICS classification within the S&P. For illustrative purposes only.

Past performance does not guarantee future results.

2. Focused on 50 Stocks with Outperformance Potential

The index next targets 10 stocks within each of those sectors that have demonstrated the highest correlation to the 10-year U.S. Treasury yield over the past 36 months. The 10 stocks in each sector are then equally weighted

EQRR Companies Sectors Sector Weights
For illustrative purposes only.

3. Reconstituted Every 3 Months

The index is reconstituted using this rules-based approach on a quarterly basis, allowing both sectors and stocks to help keep pace with evolving market conditions.

EQRR Companies Sectors Reconstitution

Go On the Offensive when Rates Rise

EQRR has outperformed the S&P 500 as the 10-year Treasury yield has risen, and sector allocation and stock selection components were both key contributors to the fund's performance.

EQRR Performance Contribution Chart

Source: FactSet, Bloomberg, 8/4/20-12/31/22. Performance is cumulative. Contribution is annualized.

A Compelling Strategy with the Convenience of an ETF

Equity strategists and portfolio managers have traditionally addressed rising rates environments with a variety of fragmented approaches. EQRR synthesizes these strategies with a rules-driven, sector and stock selection approach that delivers:

  • A focused strategy that includes only those U.S. large-cap sectors and stocks that have demonstrated a tendency to outperform when interest rates rise.
  • A complement to a core equity allocation for a rising rate environment.
  • The ease and convenience of an ETF.

Click here for fund performance.

S&P 500 performance numbers ending 06/30/23 were: 16.89% (year-to-date through Q2 2023); 19.59% (1 year); 14.60% (3 year, annualized); 12.31% (5 year, annualized); 12.42% (annualized since EQRR inception 7/24/17). Index information does not reflect any management fees, transaction costs or expenses. Indexes are unmanaged, and one cannot invest directly in an index.


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Equities for Rising Rates ETF

Seeks investment results, before fees and expenses, that track the performance of the Nasdaq U.S. Large Cap Equities for Rising Rates Index.

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This information is not meant to be investment advice. There is no guarantee that the strategies discussed will be effective. Investment comparisons are for illustrative purposes only and not meant to be all-inclusive.

Any forward-looking statements herein are based on expectations of ProShare Advisors LLC at this time. ProShare Advisors LLC undertakes no duty to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Investing is currently subject to additional risks and uncertainties related to COVID-19, including general economic, market and business conditions; changes in laws or regulations or other actions made by governmental authorities or regulatory bodies; and world economic and political developments.

Investing involves risk, including the possible loss of principal. This ProShares ETF is subject to certain risks, including the risk that the fund may not track the performance of the index and that the fund’s market price may fluctuate, which may decrease performance. Please see their summary and full prospectuses for a more complete description of risks. There is no guarantee any ProShares ETF will achieve its investment objective.

The fund is designed to provide relative outperformance, as compared to traditional U.S. large-cap indexes, such as the S&P 500, during periods of rising U.S. Treasury interest rates. As a result, the fund may be more susceptible to underperformance in a falling rate environment. There can be no guarantee that the fund will provide positive returns or outperform other indexes.

The fund concentrates its investments in certain sectors. Narrowly focused investments typically exhibit higher volatility.

Carefully consider the investment objectives, risks, charges and expenses of ProShares before investing. This and other information can be found in their summary and full prospectuses. Read them carefully before investing.

Nasdaq® is a registered trademark of Nasdaq, Inc. and is licensed for use by ProShare Advisors LLC. ProShares ETFs have not been passed on by Nasdaq, Inc. or its affiliates as to their legality or suitability. ProShares ETFs based on the Nasdaq U.S. Large Cap Equities for Rising Rates Index are not issued, sponsored, endorsed, sold, or promoted by Nasdaq, Inc. or its affiliates, and they make no representation regarding the advisability of investing in ProShares ETFs. THESE ENTITIES AND THEIR AFFILIATES MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO PROSHARES.

ProShares are distributed by SEI Investments Distribution Co., which is not affiliated with the funds’ advisor or sponsor.

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