Demand Outlook
While the ETN structure allows investors to generate big gains on directional debts, it can also lead to swift losses as most are designed to be held for short periods. Retail interest for leveraged products had boomed post-pandemic and have since moderated.
Still, products offering the most amped-up returns remain popular, according to Aniket Ullal at CFRA. ETPs giving three-times leveraged or inverse returns account for roughly 70% of assets and 75% of volume among all such products in the US. In addition, five of the top 10 most-traded ETPs in the US — based on average daily trading volume over the last three months — have been leveraged bets, he found.
But when it comes to XXXX, the timing of its debut may not be ideal since it’s entering a market that has already staged a big rally, said Athanasios Psarofagis, Bloomberg Intelligence ETF analyst.
“Not sure if investors are comfortable going 4x long here,” he said. “You also have several other levered S&P products on the market from ProShares and Direxion that they need to compete with,” he said, referring to funds that trade under the tickers SSO and UPRO that also offer exposure to the benchmark index but have leverage of 2x and 3x, respectively.
This article was provided by Bloomberg News.