On leverage can you be specific on certain etfs which I believe don’t daily reset but use futures. Would these suffer from the same issues as you mention?
Specifically wtef/ntsx in the UK that leverage fixed income with futures. Also the USA etfs return stacking from Corey Holstein.
Not saying these don’t have leverage risk but think it is different than say a 3uls etf fund short s&p500
I use wtef long term to get 60/40 mix and create “space” in portfolio for managed futures allocation.
Any ETF that uses future resets daily as part of the daily settlement of collateral for the futures. There is no leveraged or inverse ETF that does not reset daily at the close of the day.
Agreed on daily etf settlement, but the article you post that talks about particularly inverse leverage risk talks about decay 100/90/110/100 on daily or ongoing prices. The future is agreed price that is not traded daily as part of the wtef etf as far as I see but on a forward basis. So question remains if you see the risk level the same for a fund that has leverage daily reset like 3uls vs a fund that gets its leverage via a future months out? Have a look at wtef here Interested in your opinion.
Not sure, but I think there is no difference if the future is months out, simply because the future that is months out still has its collateral reset daily. And because the collateral reset is what causes the leveraged ETF to lose its exact leverage, I think the same happens for an ETF with a future months out. But as I said I am not sure. Would have to ask a professional trader.
Interesting that wisdomtree and rersolve quote these as long term fundamental assets more than speculative short term holds as per your article- could be good sales talk though ...
As i said I use wtef to gain efficient use for 60/40 to then allow space for managed futures as diversifiers which i feel is a good use.
I found this podcasts with wisdomtree CIO talking about WTEF/NTSX where he explains at 36:55 that leverage is quarterly reset with futures NOT daily and talks about the product being one to hold long term for capital efficiency. Obviously that side may or may not work out but your premise was that all leveraged etfs are bad for retail investors because of daily reset decay - i think you should do a rebuttal to say that it seems there are different types of leveraged etf that may not have the same inherent risks as the daily reset ones
Fineco discloses how many people hold the asset. I must have typed the code of my boring old vanguard fund wrong because I came across a 7x China held by 26%
Hi
Thanks for all your interesting posts.
On leverage can you be specific on certain etfs which I believe don’t daily reset but use futures. Would these suffer from the same issues as you mention?
Specifically wtef/ntsx in the UK that leverage fixed income with futures. Also the USA etfs return stacking from Corey Holstein.
Not saying these don’t have leverage risk but think it is different than say a 3uls etf fund short s&p500
I use wtef long term to get 60/40 mix and create “space” in portfolio for managed futures allocation.
Thoughts?
Thanks in advance
Any ETF that uses future resets daily as part of the daily settlement of collateral for the futures. There is no leveraged or inverse ETF that does not reset daily at the close of the day.
Agreed on daily etf settlement, but the article you post that talks about particularly inverse leverage risk talks about decay 100/90/110/100 on daily or ongoing prices. The future is agreed price that is not traded daily as part of the wtef etf as far as I see but on a forward basis. So question remains if you see the risk level the same for a fund that has leverage daily reset like 3uls vs a fund that gets its leverage via a future months out? Have a look at wtef here Interested in your opinion.
https://www.wisdomtree.eu/en-gb/etfs/efficient-core/ntsx-wisdomtree-us-efficient-core-ucits-etf---usd-acc
Thanks
Not sure, but I think there is no difference if the future is months out, simply because the future that is months out still has its collateral reset daily. And because the collateral reset is what causes the leveraged ETF to lose its exact leverage, I think the same happens for an ETF with a future months out. But as I said I am not sure. Would have to ask a professional trader.
Thanks Joachim,
Interesting that wisdomtree and rersolve quote these as long term fundamental assets more than speculative short term holds as per your article- could be good sales talk though ...
As i said I use wtef to gain efficient use for 60/40 to then allow space for managed futures as diversifiers which i feel is a good use.
Hi Joachim,
https://www.securityanalysis.org/p/jeremy-schwartz-wisdomtree-and-the
I found this podcasts with wisdomtree CIO talking about WTEF/NTSX where he explains at 36:55 that leverage is quarterly reset with futures NOT daily and talks about the product being one to hold long term for capital efficiency. Obviously that side may or may not work out but your premise was that all leveraged etfs are bad for retail investors because of daily reset decay - i think you should do a rebuttal to say that it seems there are different types of leveraged etf that may not have the same inherent risks as the daily reset ones
That has been exactly my experience. Thank you.
Fineco discloses how many people hold the asset. I must have typed the code of my boring old vanguard fund wrong because I came across a 7x China held by 26%
https://x.com/George_Aliferis/status/1772532584020402302