The year 2014 so far has been mixed for the global market given
uncertain growth in the emerging markets, slowdown in the Chinese
economy, Fed tapering policy, and number of good and bad economic
data across the globe.
While escalating tension in Russia and the prospect of interest
rates hike sooner than expected are currently pushing the global
markets down, some upbeat global economic indicators, increasing
consumer confidence, and a healing U.S. job market are acting as
Play Rising Rates with These ETFs
Given higher volatility in the stock market, investors are
embracing leverage/inverse ETPs this year for big gains in a short
period. As per Boost ETP, AUM of global leverage/inverse products
stood at a record $61.3 billion at the end of February, up 6% from
the year-ago month. About 65% of AUM comes from leverage/inverse
equity ETPs, 22% from debt, 7% from commodities, and the rest from
currency and alternative ETPs.
In fact, these products have provided outsized gains (over 50%)
just within the three months of the year, though these involve a
great deal of risk when compared to traditional products. Below, we
have highlighted four leverage/inverse ETPs that have been crushing
the market from the year-to-date look but with much greater
volatility. This trend might continue at least for the near term if
the global sentiments remain volatile (read:
3 MLP ETFs Riding Out Market Volatility
These products either create a leveraged long/short position or
inverse long/short position or leveraged inverse long/short
position in the underlying index through the use of swaps, options,
future contracts and other financial instruments.
Daily Russia Bear 3x Shares (
This fund seeks to deliver thrice (3x or 300%) the inverse (or
opposite) performance of the Vectors Russia Index. The benchmark
measures the performance of the stocks that are domiciled and
primarily listed on an exchange in Russia or generate at least 50%
of their revenues in Russia (read:
Is It Time to Flee Russian ETFs?
Energy firms take the top spot at 41% while materials, telecom and
financials round off to the next three with double-digit exposure.
About three-fifths of the portfolio is tilted toward large cap
stocks. The fund has amassed $25.7 million in its asset base while
charging 95 bps in fees and expenses. It trades in moderate volume
of less than a million shares a day and has returned about 84% so
far this year.
Direxion Daily Junior Gold Miners Index Bull 3x Shares (
This fund seeks to deliver thrice the performance of the Market
Vectors Junior Gold Miners Index. The benchmark provides exposure
to the largest and most liquid small-cap companies that derive more
than half of their revenues from gold mining. Canadian firms
dominate the return at 64%, followed by Australia (20%) and the
The ETF has accumulated $64 million in its AUM since its debut last
October. Average trading volume is good, exchanging about 276,000
shares a day while expense ratio came in at 0.95%. JNUG is up
nearly 77% in the year-to-date time frame (read:
Gold Mining ETF Investing 101
Daily Gold Miners Bull 3x shares (
This product seeks to deliver thrice the daily performance of the
NYSE Arca Gold Miners Index, which consists of firms that operate
globally in both developed and emerging markets, and are involved
primarily in the exploration and production of gold. Here again,
Canada takes the top spot at 63% while the U.S. (13%) and South
Africa (9%) round off to the top three.
The fund is rich with AUM of $755.7 million and average daily
volume of around 5.3 million. It charges investors 95 bps in annual
fees and expenses. The ETF is up over 62% so far this year.
PowerShares DB Base Metals Short ETN (
This ETN provides inverse exposure to the daily performance of the
Deutsche Bank Liquid Commodity Index - Optimum Yield Industrial
Metals - which seeks to measure the performance of underlying
futures contracts on aluminum, copper and zinc (see:
all the Inverse Commodity ETFs here
In particular, aluminum accounts for 36% share, closely followed by
copper (35%) and zinc (29%). The note is unpopular and illiquid
with AUM of just $2.5 million and average daily volume of under
3,000 shares. The product charges 0.75% in expense ratio and has
returned over 57.5% in the year-to-date time frame.
As a caveat, investors should note that these products are suitable
only for short-term traders as these are rebalanced on a daily
Still, for ETF investors who want to tap both upturns and downturns
in the global market in the near term, either of the above products
could make an interesting choice. Clearly, a near-term
leveraged/inverse could be intriguing for those with high-risk
tolerance, and a belief that the "trend is your friend" in this
corner of the investing world.
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PWRSH-DB BM SH (BOS): ETF Research Reports
DIR-DJGMI BL 3X (JNUG): ETF Research Reports
DIR-D GM BL 3X (NUGT): ETF Research Reports
DIRX-D RUS BR3X (RUSS): ETF Research Reports
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