Paul Justice, director of ETF research at Morningstar, emphasizes that the overall market share of leveraged ETFs is miniscule. According to Morningstar research, leveraged and inverse ETFs account for 5% of total ETF assets.
Additionally, inverse equities ETFs and leveraged bull ETFs categories each hold the same amount of assets, and any movements in one subset would be offset by the other, making the impact on the markets quite minimal. Consequently, the net effect of all trading in these funds comes out to be $13.5 million, which Justice calls “a drop in the bucket.” [Leveraged Funds: Tail Not Wagging the Dog, ETF Analyst Says]
For more information on ETFs, visit our ETF 101 category.
Max Chen contributed to this article.