Leveraged and inverse exchange traded funds (ETFs) are two sectors in the U.S. ETF market that have experienced a boom over the past couple of years.
According to a report on “ETF Liquidity Trends” filed by Deutsche Bank on July 22, inverse (short) and leveraged ETFs generated the third- and sixth-highest turnover levels respectively.
Paul Amery of IndexUniverse notes that in this same report by Deutsche Bank, there were 18 leveraged and 18 inverse ETFs in Europe, which represents roughly 2% of the European ETF market. This lags behind U.S. numbers, in which there are 45 inverse and 31 leveraged ETFs, combining for more than 4% of the U.S. ETF market.
Despite the domestic ETF market being larger than that of the European market, inverse and leveraged ETFs in Europe are not yet as prevalent as those in the United States for a number of potential reasons. In Europe, for one, there’s a relative lack of interest on the part of retail investors.
Regardless of the development of the European leveraged and inverse ETF sector being slower than this sector here, it is an area which is host to dynamic product development and increasing demand. Some long and short ETFs include:
- UltraShort Financials ProShares (SKF), up 33.1% year-to-date
- Rydex Inverse 2x Russell 2000 (RRZ), up 11.1% year-to-date
- Rydex 2x S&P Select Sector Health Care (RHM), launched July 22
- UltraShort Basic Materials ProShares (SMN), down 13.2% year-to-date
- Ultra Financials ProShares (UYG), down 50% year-to-date
Read the disclosure, as Tom Lydon is a board member of Rydex Funds.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. 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.