“It’s understandable for the investment community to look for possible explanations in periods of extreme volatility,” it noted. [Do Leveraged ETFs Really Move the Market?]
One of the issues raised in the WSJ article was that leveraged ETFs may be adding to volatility near the end of the trading day as the managers rebalance the portfolio.
However, the last hour of U.S. stock trading this year hasn’t been relatively more volatile than the rest of the day, said Phil Mackintosh, head of Credit Suisse’s global portfolio strategy team. This contrasts with the credit crisis in 2008, when volatility did increase in the final hour of trading.
Leveraged ETFs are being “unfairly blamed” for the higher volatility in stocks, Mackintosh said in an interview.
“The VIX is elevated, there are a lot of macro events driving markets and we’ve seen record outflows from mutual funds. Blaming ETFs for everything that’s going on at the close due to the rebalance trade is pretty naive, really,” he said.
