Bringing you live news and features since 2006 

Leveraged and inverse ETFs could cause investment shortfall, report finds

RELATED TOPICS​

Investors who hold leveraged and inverse exchange-traded funds for periods longer than a day expose themselves to substantial risk that the holding period returns will deviate from the returns to a leveraged or inverse investment in the index, according to a report from Securities Litigation and Consulting Group.

The report, by Ilan Guedj, Guohua Li and Craig McCann, reports estimated distributions of holding periods for investors in actual leveraged and inverse ETFs using standard stock trading models found in the literature.

It estimates the investment shortfall incurred by investors who hold leveraged and inverse compared to investing in a simple margin account to generate the same leveraged or short investment strategy to be as much as three per cent of their investment in less than three weeks, an annualiaed cost of 50 per cent. 

The study also discusses the viability of leveraged and inverse leveraged ETFs that rebalance less often than daily and calculate their costs to investors.

Latest News

Morningstar has published a review of the European ETF market for the first quarter 2024, which finds that it gathered..
ETF data consultant ETFGI reports that assets invested in the global ETF industry reached a new record of USD12.71 trillion..
Calastone has published an ETF white paper which examines several of the processes that take place across the lifecycle of..
Adapting product lines to fit into changing methodologies and meet shifting demand is essential to remaining relevant in the industry..

Related Articles

Kristen Mierzwa, FTSE Russell
Index Investments Group (IIG), a division within index provider FTSE Russell, has extended its range of indices through two new...
ETFs
US ETF issuers of active ETFs are facing an increase in fees from the big custodian firms, such as Charles...
Taylor Krystkowiak, Themes ETFs
Themes ETFs opened its doors in December 2023, with an introductory suite of 11 ETFs – seven thematic and four...
Konrad Sippel, Solactive
At the end of March, financial index specialist, Solactive, published its 2024 annual report on future trends.  ...
Subscribe to the ETF Express newsletter

Subscribe for access to our weekly newsletter, newsletter archive, updates on the site and exclusive email content.

Marketing by