LEVERAGE YOUR RETURNS
Seven new leveraged ETFs were launched by db x-trackers this week. Three of the ETFs will track daily leveraged short indices, while four will track leveraged long indices. The three short ETFs provide two times daily inverse exposure to leading G7 stock markets including Germany’s Dax, the Euro STOXX 50 and the S&P 500. The long indices provide two times daily long exposure to the same indices as well as the FTSE 100. Analysts recommend that daily leveraged ETFs are used by sophisticated investors who want to hold them for short time frames.
ARE FUNDS OF FUNDS ETFS THE FUTURE?
One of the newest ETFs to hit the market in the US in recent days was a fund of multiple ETFs. The One Fund, a relative newcomer to the ETF market in the US, is offering exposure to a variety of ETFs that will give investors exposure to global equity indices. The ETFs in the fund include four issued by Vanguard and one issued by iShares. About 70 per cent of the underlying securities’ holdings are in the US, 16 per cent in Europe and 12 per cent in Asia. The all in expense ratio for the fund is 0.51 per cent. Although they are yet to reach Europe this could be the future.
ETFS AFFECTED BY DOW MELTDOWN
Last week’s bizarre action in the financial markets, when the Dow lost more than 1,000 points at one stage, is still under investigation by the regulators. The main stock exchanges in the US announced that they would cancel trades where shares had fallen more than 60 per cent during the affected period. At one point share prices in some of the US’s top companies actually touched zero. However, it is now emerging that ETFs were also affected and accounted for a large proportion – 70 per cent according to reports – of the cancelled trades.