ETF Database » SAA

September Performance Debunks Leveraged ETF Myth

Michael Johnston — Wed, 07 Oct 2009 08:00:48 +0000

Over the last year, leveraged ETFs have been the subject of intense scrutiny from a number of parties, including regulatory agencies, state governments, broker-dealers, individual investors, and even class action lawyers. While several aspects of leveraged ETFs have been thoroughly analyzed and debated, perhaps no issue has drawn more attention than the effects of compounding returns when held for multiple trading sessions. Because most leveraged ETFs seek to provide amplified returns on a daily basis, they reset their exposure to the underlying benchmark on daily. As a result, the performance of leveraged ETFs over multiple trading sessions depends not only on the movement in the reference benchmark, but on the direction of the markets during that time period. In seesawing markets, returns can vary significantly in magnitude and even direction of changes in the fund’s reference index (see our Free Guide to Leveraged ETFs for a more thorough discussion). Unprecedented [...]

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Responding To Calls For ETF Regulation

Michael Johnston — Tue, 16 Jun 2009 05:30:35 +0000

In the week during which the Obama administration will unveil details surrounding its plan to revamp the regulation of the U.S. financial sector, calls for increased oversight of the ETF industry are picking up steam as well. Scott Burns, director of ETF Analysis at Morningstar, recently laid out a case for increased regulatory requirements for ETFs that use derivatives to achieve their objectives. But I’m not quite convinced that more regulation is the answer. In The Beginning… The first ETFs were equivalent to “plain vanilla” financial instruments, tracking well-known equity and fixed income indexes by duplicating their underlying holdings. Even today, the simplest ETFs remain among the most popular – the indexes tracked by the largest ETFs by market capitalization should be familiar to almost all investors. But as the ETF structure became more familiar and investors became more educated on the advantages of ETFs relative to traditional mutual funds, the [...]

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ETF Database » SAA

September Performance Debunks Leveraged ETF Myth

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Responding To Calls For ETF Regulation

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