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Leverage With A Twist: Two For The Price Of One?
July 14, 2009 5:46 am
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The leveraged and inverse exchange-traded funds market could be getting a new competitor. And that new rival to alternative index leaders such as ProShares and Direxion is proposing an interesting twist to the whole leveraged concept. Namely, the first proposed ETFs by a group calling itself the FactorETF Trust would aim at providing 200% of the daily return of an underlying index. But here’s the wrinkle—the proposed ETFs to launch first would be based on underlying indexes that measure their respective sector and/or asset class against broader markets. For example, the FactorETF 2x REIT Shares is described as attempting to provide 200% of the daily excess return of U.S. real estate investment trust stocks vs. the broader domestic stock market. The same is true for the rest of the FactorETF Shares listed – there’s one for gold, U.S. stocks versus U.S. government bonds as well as short-duration government bonds versus long-term issues. But the list gets even more interesting in terms of asset classes being leveraged by competing indexes. Here’s a sample of some of the asset classes that would be contrasted, presumably with the return differences receiving the 200% leverage exposure:
Also being requested is the launching of an ETF that would leverage 2x return differences of bonds versus stocks. At least initially, the firm plans to launch 23 leveraged ETFs. It’s also asking regulators for approval to offer a broader range of ETFs that provide 100%, 200% and 300% exposure to various underlying indexes. Specifics of those benchmarks aren’t listed, but they’re apparently designed by Factor Advisors. Based in Elizabeth, N.J., the company’s president is listed as Stuart J. Rosenthal. According to recent filings made to the Securities and Exchange Commission, the trust would hire subadvisers to handle at least some of the proposed funds’ portfolios. All would be index-based and cover a variety of different asset classes, including long and short strategies. The filing also mentions traditional long-only funds as a possibility. A representative of the FactorETF Trust declined to comment on the filing until regulators make a ruling on the firm's application for exemptive relief. You can read the filing here.
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Short-Seller’s Guide To GLD
Gold, despite its recent rebound, has gotten clobbered over the past three months.Looking Beyond VWO And EEM
Broad-based, cap-weighted ETFs were the way to play emerging markets over the past decade. But it’s time for investors to become more strategic and look beyond VWO and EEM.-
May 23, 2012
Looking Beyond VWO And EEM Broad-based, cap-weighted ETFs were the way to play emerging markets over the past decade. But it’s time for investors to become more strategic and look beyond VWO and EEM. -
May 22, 2012
Best/Worst Daily ETF Returns: Energy Shines CRUD was the best-performing ETF on Monday, May 21, boosted by policymakers’ search for ways to support the global economy. -
May 21, 2012
iShares Plans LatAm Bond ETF New iShares ETF Takes aim at relatively untapped Latin American bond space. -
May 18, 2012
Best/Worst Weekly ETF Returns: GREK Off 18.6% GREK tumbled 18.57 percent in the week ended May 17, as the current structure of the eurozone teeters on the brink. -
May 16, 2012
Best/Worst Daily ETF Returns: GLDX Falls 8.27% GLDX and other precious metals ETFs were among the worst-performing ETFs on Tuesday, May 15, as anxiety mounted over Greece's future in the eurozone.
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JP Morgan & ETN Credit Risk
Paul & Ugo discuss the implications of J.P. Morgan's $2 billion loss, the European debt crisis and what it means for ETN investors.
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