An interest-rate hike from the Federal Reserve at the September meeting today is starting to look like a slam dunk-and Wall Street is even starting to price in the possibility of another increase this year. That may make some investors nervous, of course. But there are actually stocks that could thrive if the Fed starts a tightening cycle.

That's where the ProShares Equities for Rising Rates exchange-traded fund comes in.

Of course, several types of fixed-income funds, particularly floating-rate bond and funds that own short-term U.S. Treasury bills, benefit from higher rates. But there aren't as many stock funds that thrive when the Fed is hiking.

As its name implies, the ProShares ETF invests in stocks that should do well when rates are going up. It is passively managed, meaning there is no team picking individual stocks. The fund tracks the holdings in the Nasdaq U.S. large-cap Equities for Rising Rates Index.

The ETF delivered on its promise in 2022, the last time the Fed was in the midst of a major rate-hiking cycle. It posted a total return, including reinvestment of dividends, of more than 2% in 2022. The S&P 500 index, meanwhile, tumbled more than 18%.

Can history repeat itself? There are some challenges, but the fund could still have some room to run.

It's true that there are questions about how much the Fed will hike. The federal-funds rate is currently in a range of 3.5% to 3.75% following three cuts late last year. But it's worth pointing out that rates rose as high as 5.25% to 5.5% in 2023 after a series of hikes to combat rampant inflation following the Covid pandemic.

Another risk?

Investors looking to buy the ETF now also need to keep in mind that the fund is relatively small and it has already enjoyed phenomenal gains. It is up 36% this year thanks to a heavy focus on energy stocks, which have soared due to rising oil prices in the wake of the war with Iran. Marathon Petroleum, Valero Energy, ConocoPhillips, and Chevron are the top four holdings in the fund.

Still, investors have flocked to the fund thanks to its healthy gains. That's likely to continue. The ETF's strong performance is a key reason why it has brought in $12.3 million in net assets so far this year, according to FactSet. That's a big chunk of its $35 million in assets.

But the fund remains relatively small compared with other ETFs, many of which have billions of dollars in assets. So there is room to grow.

ProShares could continue to benefit from other macro trends too. Technology stocks are actually the biggest sector in the fund. They account for more than 36%, led by several stakes in red-hot cybersecurity companies. Zscaler, CrowdStrike, Palo Alto Networks, and Fortinet are among the ETF's top 15 holdings.

The fund also owns Nvidia and Alphabet, which should benefit from the artificial-intelligence boom despite some recent concerns about the rapid pace of AI adoption. (Leading executives from Anthropic and ChatGPT owner OpenAI have called for an AI slowdown.)

The ETF also has nearly 20% of its assets in financial stocks, which historically have gotten a profit margin boost due to higher short-term and longer term interest rates. Ameriprise Financial, JPMorgan Chase, MetLife, Raymond James Financial, and First Citizens Bancshares are among its more notable holdings in this sector.

Fed rate hikes should prop up these and many of the fund's other investments even if oil prices eventually retreat and push down its energy holdings. The ETF is relatively cheap too, trading at just 14 times 2027 earnings estimates compared with a price/earnings ratio of around 18 for the S&P 500.

In other words, investors shouldn't be too worried by how much this ETF has run up already this year. There's more room to go.