U.S. Markets closed

Leveraged ETFs Assets Flirt With $51 Billion


Still just a small slice of the $2.16 trillion in assets under management across global exchange traded products, global inverse and leveraged ETFs saw their AUM total rise $1.7 billion, or 3.5%, to $50.9 billion at the end of June, according to Boost ETP. Boost is a boutique firm specializing in trading triple-leveraged ETFs listed in Europe.

Year-to-date, “global S&L ETF/ETP AUM is up $6.8 billion or 15%” and “57% of AUM is held in short products with leverage factors ranging between -1x to -3x. However the leverage factor with the most assets is +2x, with 33% of AUM. 43% of AUM is held in long products with leverage factors ranging between +1.5x to +3x,” according to Boost.

While leveraged ETFs have a reputation for diverging significantly from the indexes they are designed and a penchant for being reverse split, the products have found favor with investors looking to capture out-sized gains in short time frames. [Investors Still Like Leveraged ETFs]

Last month, a U.S. appeals court has rejected a lawsuit alleging leveraged ETF provider ProShares failed to adequately disclose the funds’ risks. ProShares is the largest U.S. issuer of leveraged and inverse funds and the sixth-largest U.S. ETF sponsor overall with $25.3 billion in AUM. Rival Direxion has almost $6.4 billion in AUM. [Court Rejects Suit Against ProShares]

“From January to May there was a decline in long equity positions and an increase in short equity positions. June saw a reversal of that trend with inflows of $4.1 billion into long equity ETFs/ETPs and outflows of $609 million from short equity ETFs/ETPs equal to $10.1 billion net long notional flows in June (after taking leverage factor into account),” said Boost.

Boost said $163 million was pulled from global bearish commodities ETFs in June while $1 billion was pulled from long, leveraged bets on U.S. government bonds, outflows that coincide with rising yields on 10-year Treasurys.

Popular U.S.-listed leveraged ETFs include the ProShares UltraShort 20+ Year Treasury (TBT) , the ProShares UltraPro Short QQQ (SQQQ) and the Direxion Daily Financial Bear 3X Shares (FAZ) .

Direxion Daily Financial Bear 3X Shares

ETF Trends editorial team contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.