Innovation has been on display in the ETF industry in recent years, as various issuers have been active on the product development front in their efforts to bring new and exciting products to market. One area that has seen tremendous growth is the leveraged ETF space; investors have embraced the exchange-traded structure as an efficient means of amplifying exposure to everything from Chinese stocks (YINN, YANG) to gold (UGL, GLL) to long-term Treasuries (TBT, UBT).
In total, there are nearly 200 leveraged ETPs, covering dozen of different asset classes. But not all leveraged exchange-traded products utilize the same structure; there are some nuances across the roster of these funds that can have a significant impact on the risk/return profile offered. Most investors are aware of the differences between ETFs and ETNs, including distinctions in credit risk, tracking error, and sometimes tax ramifications as well. But some don’t realize that the reset frequency can also vary from product to product, and that the timing of such resets can have a major impact on the volatility and potential returns of a product. [click to continue…]
{ 1 comment }
