Powayseller, as suspected this fund shorts property-related stocks and REITs by shorting the constituents of Dow Jones US Real Estate Index (see http://www.djindexes.com/mdsidx/index.cfm?event=showComponentWeights&rptsymbol=DJUSRE&sitemapid=1). I agree that this is one approach but my issue is I think we both agree that residential property prices in SD (and most of So Cal) is poised for a correction. But what about the rest of the country (I don’t know but I can’t imagine the same case for Iowa) and commercial real estates ? Plus a lot of the REITs included in the index may be mortgage REITs rather than equity REITs and mortgage REITs may have a lower correlation with property prices (actually I don’t know enough about commercial REs and mortgage REITs to say yes or no).
If you check out the index’s performance (http://finance.yahoo.com/q/bc?s=IYR&t=my), you’d notice an interesting fact that from ’01 to ’03 the index went nowhere, and that didn’t correspond to what we know of as the start of the boom of the property market. Fear is therefore if there’s a lagging effect between property prices and property stocks / REIT prices then shorting stocks & REITs at this point may be a little too soon.
I guess my point is the advantage of Profund Short US RE Fund seems to be a good broad-based exposure to the inverse of property prices but there are other factors that need to be taken into consideration and it doesn’t seem “focused” enough for my taste at the moment.
