Providers of leveraged exchange traded funds say investors understand how to use the products and the business don’t need a labeling system proposed by the world’s largest ETF manager.
BlackRock (NYSE: BLK), the investment manager behind the iShares brand, at a Senate subcommittee hearing last month said leveraged and inverse funds shouldn’t be labeled ETF. [ProShares Balks at Classification System]
BlackRock suggested that leveraged and inverse funds that try to reflect the double or triple daily performance of a benchmark should be renamed as “exchange traded instruments”, or EFIs, reports Karen Damato for The Wall Street Journal. The company said 98% of its current iShares ETFs would qualify under this proposed moniker system. [BlackRock Calls for More Disclosure, Transparency in ETFs]
ProShare Advisors Chief Executive Officer Michael Sapir believes BlackRock’s idea “is just plain arbitrary and unworkable.” Sapir stated that it is “anti-competitive” since the relabeling would only affect BlackRock’s rivals. BlackRock does not oversee and leveraged or inverse ETFs.
Leveraged ETF providers say they are in favor of more disclosure and education for investors, and that the media and regulators have warned about the risks of the financial products, according to the WSJ report. Most investors in leveraged ETFs “understand these products and use them wisely,” said Dan O’Neill, managing director of Rafferty Asset Management, which sponsors the Direxion Shares leveraged funds.
For more information on ETFs, visit our ETF 101 category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. 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.