Although leveraged and inverse exchange traded funds (ETFs) have been under scrutiny, it appears that investors are still not throwing in the towel on these investment products despite figures that could suggest otherwise. Rather, it could just be shifting trends.

A recent report by State Street indicates that total assets in leveraged and inverse ETFs dropped nearly 6.8% in August.  Additionally, leveraged U.S. stock ETFs took the biggest hit in August with net outflows of nearly $2.4 billion.  But it wasn’t all gloom for the controversial investment tools.  Of the nearly $5 billion of net inflows into ETFs, nearly $1 billion came from four leveraged and inverse ETFs.

Assets are just one part of the overall picture, however.

Murray Coleman of Index Universe analyzed leveraged and inverse ETFs and makes the case that in the month of August, many investors decided to hedge their bets and shift from leverage into inverse funds.  Supporting his argument is the fact that six of the top 10 ETFs in terms of assets, all of which are long-only, had net outflows in August.

As the economy begins to stabilize, investors are starting to increase their appetite for risk and will continue to do so.  With the proper education, leveraged and inverse ETFs can be the answer for the right investor to fulfill this appetite.

For more stories on leveraged and inverse ETFs, visit our long-short ETF category. Read our special report on leveraged and inverse ETFs here.

Kevin Grewal contributed to this article.

Tags: ETF 101, Long-Short ETFs