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The Stealthy Existence of Leveraged Health Care ETFs


One of these exchange traded funds has nearly doubled this year. Both track the S&P 500’s top-performing sector, that being health care.

Perhaps because the Ultra Health Care ProShares (RXL) and the Direxion Daily Healthcare Bull 3x Shares (CURE) are double- and triple-leveraged plays on a sector that has been rewarding enough without leverage, investors have not been running to these ETFs.

That is not to say CURE and RXL are so small that they should be glossed over on size alone. Investors have allocated nearly $23.9 million in new assets to RXL this year and the ETF had almost $121 million in assets under management at the end of third quarter, according to issuer data.

Although the usual caveat of leveraged ETFs not being buy and hold instruments certainly applies to CURE and RXL, the allure of these funds is obvious. RXL entered Friday with a year-to-date gain of 61.3% while CURE is up 98.3%. [Some of the Best Leveraged ETFs are Getting no Love]

Due to the effects of daily rebalancing, some leveraged ETFs are famous for significantly lagging their underlying indexes and their non-leveraged equivalents. That has not been the case this year with CURE and RXL.

CURE attempts to deliver three times the daily returns of the S&P Health Care Select Sector Index, the underlying benchmark for the Health Care Select Sector SPDR (XLV) . RLX seeks to deliver twice the daily performance of the Dow Jones U.S. Health Care Index, which is tracked by the iShares U.S. Healthcare ETF (IYH) . XLV and IYH are reach up about 28% this year, indicating that RXL and CURE have more than outpaced double and triple the returns of their non-leveraged counterparts. [Leveraged Health Care ETFs Gain Supporters]

CURE has also seen modest creation activity over the past month, according to Direxion data.

One leveraged health care ETF that has been a somewhat prolific asset gatherer this year is the ProShares Ultra Nasdaq Biotechnology (BIB) .

With five biotech ETFs ranking as this year’s top five sector ETFs of any type, it is not surprising that BIB was a $327 million fund at the end of the third quarter and that investors have poured $227.4 million into the ETF this year.

BIB is the double-leveraged equivalent of the iShares Nasdaq Biotechnology ETF (IBB) , the largest biotech ETF. To its credit, BIB has done fine job of delivering almost exactly double the performance of the NASDAQ Biotechnology Index, IBB’s underlying index. IBB is up 35.6% this year while BIB is higher by 73.2%.

Direxion Daily Healthcare Bull 3x Shares