New asset class - single stock leveraged funds - ETPs

Just curious to see what others think of these. This story shares a few different opinions from companies in the investment space. I can’t see how they’re a good idea?

Similar to the leveraged ETNs but focused on a single security. I’ve used similar leveraged exchange traded solutions for shorting the FTSE 100 for instance.

Most of the leveraged ET- solutions do have downside protection in place so there are no margin calls, you stand to lose what you put in, you can’t lose more. However, you can lose it significantly faster than you expect.

The biggest issues has always been the cost, the bid/ask spreads are generally extremely aggressive, that plus the high ongoing fees (as they are designed for short holding periods) it can be extremely difficult for a retail investor to turn a profit.

Thankfully in the UK these fall under as sophisticated investment products, meaning most brokers will make you fill in an eligibility questionnaire. It’s normally something you need to proactively ask for rather than finding the product and then signing up.

Until the costs for trading leveraged exchange traded products comes down that will remain more of an institutional and portfolio manager hedging tool. Not something I would realistically recommend to anyone.

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