SG Launches Structured ETFs on Euronext

SG Asset Management put out a press release recently about the launch of two interesting new structured ETF products in France. Both ETFs will track the CAC40 index of large-cap issues on the Paris Bourse, but each does so with a twist. One fund, designed for risk averse investors, will couple index exposure with portfolio insurance to provide investors with muted exposure to the index. The other fund will do precisely the opposite, offering levered exposure to the underlying index in order to replicate 200% of the gains and losses of the CAC40.

I’m really excited by products like these, as they represent genuninely useful instruments for individual investors. Most individual investors intuitively grasp the notion of leveraged and inverse funds, but the logistics of actually constructing margin and short portfolios can be daunting. The prospect of buying a single security that trades like a stock but achieves the same financial end is definitely appealing.

We’ve already seen inverse and levered funds in the U.S. from innovative fund companies like Rydex, but the costs are still fairly high for these products. (For example, the expense ratio on the Rydex Inverse Dynamic Dow 30 (RYCWX) is 1.67%, and that’s actually below the category average for bear funds, which is currently 1.98% according to Yahoo Finance.) ETFs offer a way of providing individual investors access to similar portfolios and making them available in easily tradeable shares, but at lower costs. I hope to see such exchange traded products become available in the U.S.

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