Paul Schatz, president and CEO of Heritage Capital: For the most part, yes. However, if you really dial down to the double- and triple-leveraged funds, both the long and the shorts got hammered last year because of the compounding effect.
Paul Simon, chief investment officer at Tactical Allocation Group: When you’re going to a two- or three-X, whether it’s an inverse or a leveraged situation with one of these ETFs, they’re inherently going to be more volatile. But in a situation like the last 18 months, where volatility was unprecedented, its a bad mix. It’s the main reason to do your homework, and to be careful. (Do leveraged ETFs actually belong in your portfolio?)
On active ETFs:
Ms. Moriarty: There is no true active ETF yet. And in order to understand this, you need to know a three-second background on how the ETFs started. Basically, the ETFs are very odd kind of mutual fund. The real Holy Grail is to do a non-disclosed actively managed fund. And there are about six different ideas of how to do this. They have been down at the SEC pending review for about two to three years, and I don’t know how much longer that’s going to take. (Will the demad for active management in ETFs grow to mainstream?)
For more stories about active ETFs or leveraged ETFs, visit their respective category pages.