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
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Top 10 Most Expensive Luxury Cars in the World – 2014

Killer Small Business Ideas

The 50 Best Personal Finance Blogs

Most Expensive Apartments in New York City

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!