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Some newer ETFs as well as some of the larger commodity ETFs deserve more diligence according to the WSJ’s Tom Lauricella.

In the column Far From Vanilla: Some Booming ETFs Need More Scrutiny, Lauricella writes that certain fund pairs that were designed to profit from opposite moves in markets had both either risen or fallen.

For example, ProShares Ultra Real Estate (URE) and ProShares UltraShort Real Estate (SRS) were down 46% and 64% respectively for the six months ended June 30 compared to a negative 12% return for the funds’ benchmark index. The problem lies in the design of the funds which are built to deliver against a daily target. The effects of compounding can cause the leveraged funds to go off track if held longer than one day.

Lauricella also warns that some ETFs may be too big relative to the size of their respective markets. Case in point, the United States Natural Gas Fund (UNG) which earlier this year held the equivalent of 20% of all natural-gas futures contracts.

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The Wall Street Journal took another swipe at ProShares and other marketers of leveraged ETFs in the article REIT Moves Rub Executives Wrong Way.

Reporter Anton Troianovski writes that increased trading in REITs has caused an increase in stock price volatility. For example, in 35 out of 61 trading days since September 30– the Dow Jones Equity All REIT Index rose or fell 5% or more. Fifteen of those days saw moves of 10% or greater.

Real estate investment trusts typically see less action due to the long-term nature of real estate development and leasing.

According to Troianovski, REIT executives are blaming trading in leveraged ETFs for the large price swings in REITs. For example, the ProShares Ultra Real Estate (URE) fund and the ProShares UltraShort Real Estate (SRS) fund have both seen the volume levels hit yearly highs in December.

In response to a WSJ article earlier the month, ProShares Chief Executive Michael Sapir said that the idea that leveraged exchange-traded funds cause the end-of-day ups and downs in stock prices is “utter postulation.”

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