Leveraged ETFs: An Endangered Species? – ProShares UltraShort 20+ Year Trea (ETF) (TBT), ProShares UltraShort S&P500 (ETF) (SDS)

Page 1 of 2

Exchange-traded funds have made investing a lot simpler for millions of investors. But ETFs have also introduced a wide variety of previously unavailable assets to the mainstream investing world. One of the most dangerous and misunderstood sets of funds has been the leveraged ETF space, where traders seek to make big bets on fast-paced moves in a particular market.

Despite their high risk, leveraged ETFs have shown no sign of disappearing. But with a recent move by one of the pioneers of the industry to close its final two leveraged ETFs, the big question is what’s behind the decision to abandon the space. Could leveraged ETFs finally be losing their appeal? Let’s take a closer look.

Leveraged ETF

Guggenheim gives up on leveraged ETFs
Recently, ETF provider Guggenheim Investments decided to close nine of its ETFs. Although most of the funds affected were based on specialized sectors or market cap, two of the funds were leveraged ETFs tracking the S&P 500. There’s nothing all that surprising about the news in itself. Both of the ETFs had assets well below the $100 million mark, which is widely seen as the amount necessary for an ETF to survive for the long term.

But Guggenheim’s decision is remarkable because of its history. As a recent article in ETF Daily News noted, Guggenheim acquired the ETFs when it bought out Rydex, which was the first company to offer a leveraged mutual fund two decades ago.

Who’s left?
With Guggenheim’s departure, the remaining big players in the leveraged ETF space are ProShares and Direxion. But unlike Guggenheim, both Direxion and ProShares show every sign of staying in the leveraged-ETF space for a long time.

ProShares in particular has a healthy slate of funds. Look at a list of leveraged ETFs by assets under management, and you’ll find that most of the entries come from ProShares. In large part, the success of ProShares owes to its ability to offer ways to play popular trends, as its biggest funds show.

For years, investors have been looking for bond yields to start rising. ProShares UltraShort 20+ Year Treasury (NYSEARCA:TBT) promises high returns when that happens, and the fund has more than $3.3 billion in cash, along with a variety of derivative positions designed to provide returns equal to double the inverse daily return of an index of long-term bonds.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!