State Street Global Advisors' Mid Year ETF Review
, released Wednesday, gave a special look to leveraged/inverse ETFs in light of the continued growth of the products. With regards to the scope of the leveraged/inverse space, the report noted that asset levels for the leveraged/inverse category had risen to $32 billion from $11 billion in the beginning of 2008. In the month of June, leveraged/inverse products represented three of the top ten ETFs in terms of notational dollar volume, and traded upwards of $1.5 billion per day.
The report mentioned that the top three leveraged/inverse funds by assets had an "atypical" presence among retail investors. The proportion of institutional ownership in these three leveraged/inverse funds -- ProShares UltraShort 20+ Year Treasury, ProShares UltraShort S&P 500 and ProShares Ultra Financials, which had 24.42, 11.14 and 9.68 percent institutional ownership, respectively -- was described in the report as "limited relative to some of the larger ETFs in the universe."
For comparison's sake, the report listed the percentage of institutional ownership for SPDR S&P 500, Gold Shares and MSCI Emerging Markets as 87.65, 45.08 and 66.15 percent, respectively.
The report made reference to regulatory notice issued by FINRA last month, and stressed the point that long-term holdings of daily return structured products can result in discrepancies between fund performance and the stated multiples of the underlying index. This echoes concern exhibited by Edward Jones, which, as reported by the WSJ
Tuesday, has dropped leveraged ETFs from the lineup of investment products it makes available to clients.
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