Toronto-based financial services company BetaPro Management Inc. has launched a pair of bull-and-bear exchange-traded funds on the Toronto Stock Exchange. Listed Jan. 9, the Horizons BetaPro ETFs are the first in Canada to offer both inverse and magnified exposure to the S&P/TSX 60 index.

For magnified exposure to index growth, Horizons BetaPro S&P/TSX 60 Bull Plus ETF reflects 200% of the daily performance of the S&P/TSX 60. For each 1% the index rises, the ETF rises by 2%. However, for each 1% the index falls, the ETF falls by 2%.

The inverse exposure comes from Horizons BetaPro S&P/TSX 60 Bear Plus ETF. Ideal for hedging risk during a market downturn, the Bear Plus ETF will yield twice the value of the index movement, but in reverse. If the index falls by 2% in a day, the ETF gains by 4%. Conversely, if the index rises by 2%, the ETF loses 4%.

These ETFs allow investors to profit or protect themselves in bull and bear markets. They fit in with the 14 bull-and-bear mutual funds already offered by BetaPro, a subsidiary ofJovian Capital Corp. of Toronto.

Howard Atkinson, president of the Horizons BetaPro ETFs division and past head of business development of exchange-traded products at Toronto-based Barclays Global Investors Canada Ltd. , is happy with the initial response from investors and advisors: “There are three investment strategies here, and that carries obvious appeal for advisors. For those who are bullish, the ETF bull product offers 200% exposure. For those who are bearish, the ETF bear product offers 200% exposure. And those who are nervous about the market and own Canadian equity can use the ETF bear side to hedge risk. It’s like having your cake and eating it, too.”

Although mainstream ETFs are largely suitable for the everyday investors, products as specialized as the Horizons BetaPro ETFs are more complicated. Dan Hallett, president of Windsor, Ont.-based fund analyst Dan Hallett & Associates Inc. , says that means a high risk of misuse.

“When you’re talking about leveraged investments and those that can also give you short exposure, there are certainly some good uses for funds like that,” Hallett says. “But for most investors, I don’t really think they’re very suitable.”

As with any new product, time will tell if the funds can gain enough assets to be self-sustaining.

“What would benefit them most is if volatility in the market really ramps up, because that’s where more aggressive investors will take even more of a liking to this kind of product,” Hallett says, pointing out the necessity of timing the market to obtain real benefits from these investments.

“There is certainly some appeal, from a diversification standpoint,” he adds. “I don’t think it would be something you would have for a long-term holding. I think it would be something you use from time to time to hedge market risk.”

The launch makes BetaPro a third presence in the Canadian ETF marketplace. The dominating Barclays made its ETF entrance in 1999 and now offers 21 Canadian iShares. Toronto-based Claymore Investments Inc., which entered the market in February 2006, rounds out the scene with its offering of seven ETFs.

Other firms have tried their hand at the game, with little success. Last March, TD Asset Management Inc. liquidated its four Canadian equity ETFs after three years in the business. At the time, there were $394.9 million in assets held in TD’s ETFs, compared with the $15 billion Canadian investors held in Barclays ETF iUnit family in Canada (since renamed iShares) and U.S.-based iShares.

BetaPro’s niche-market ETFs are based on strategies similar to the bull-and-bear ETFs launched south of the border by the portfolio manager for BetaPro’s funds, ProShare Advisors LLC of Bethesda, Md.

National Bank Financial Ltd. serves as the broker for BetaPro’s ETFs. IE