PureFunds Chief Executive Andrew Chanin, though, reassures investors that the firm is closely monitoring the fund and holdings, and that the ETF creation/redemption mechanism is “not something they see a significant issue with at the moment.”
On the other hand, Cohen is looking into potential inefficiencies in the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate oil futures, during both stable or volatile market conditions. Specifically, some ETFs, like USO, rebalance holdings around specific dates, which may entice front running. In the case of USO, the ETF rolls front-month WTI crude oil contracts that are close to expiring for the next month’s contract.
Nevertheless, a USO representative told the WSJ that the practice “does not seem to be having an impact on the market or USO’s ability to achieve its objective.”
Additionally, some hedge funds have short positions in both bearish and bullish leveraged ETFs in the same industry, betting on the belief that over the long-term, high fees and a daily rebalancing will diminish the potential upside of leveraged ETFs in market upswings and exaggerate falls.
For more information on the ETF industry, visit our current affairs category.
Max Chen contributed to this article.