In case people hadn’t noticed, levered ETF companies are planning to turn the volume up to eleven. We are seeing a new class of triple-levered ETFs launched, with the idea that you will get triple the daily return of the underlying index, depending on whether you bought the short or the long variant.
Now, levered ETFs aren’t new. We have had long and short index ETFs for some time, as well as double-levered such things too. But the rise of triple-levered ETFs at a time when volatility measures are doing moonshots strikes me as unusual, at best, and possibly marking a new source of market risk.
Granted, the current assets aren’t massive, but these levered products are sizable. Their impact can also be considerably larger given the underlying leverage, and given how retail investors can be buy levered ETFs with … well, leverage.
Here is some quick and cursory data that I put together that I think is fairly striking on asset growth at some of the more popular levered ETFs. In particular, I was intrigued by how much more popular the double-levered variants of such things are –- people wants their volatility in big chunks, apparently.