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ETF that bets on dying malls missed the 'retailpocalypse'

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The “retailpocalypse” came, but for an ETF aimed at capitalizing on it, shopping Armageddon may have passed too quickly.

The ProShares Decline of the Retail Store ETF (EMTY) was started in November 2017 to bet against brick-and-mortar retailers that were poised to suffer from the dominance of internet shopping. At the time, the largest retail fund — the SPDR S&P Retail ETF (XRT) — was down more than 8.5% for the year compared with a 17% gain in the S&P 500.

For clients looking for investment income, these funds excelled in the first half of 2017.
July 26

But fortunes have turned since then, as XRT has nearly tripled the return of the broader benchmark, while EMTY has declined around 13%.

“This is par for the course for thematic strategies,” says Bloomberg Intelligence analyst Eric Balchunas. “They tend to launch after a sweet backtest and then traditionally on average go down after their launch, because no one is going to list a product after a long, ugly backtest.”

Over the past year, opportunities to wager on the mall’s demise have captured the attention of everyone from hedge fund types to computer-driven analysts. But on Monday, strategists at Evercore ISI sounded a counter-note, declaring the retailpocalypse “over” as results have improved and stores figure out how to manage inventory and market to customers in the digital age.

Bloomberg News