ETFMG unveils its first leveraged and inverse ETFs

Jun 21st, 2021 | By | Category: Alternatives / Multi-Asset

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ETF Managers Group (ETFMG) has unveiled its first leveraged and inverse ETFs.

Sam Masucci, CEO and Founder of ETFMG

Sam Masucci, CEO and Founder of ETFMG

In the process of doing so, it has become the first issuer to launch leveraged ETFs utilizing the ‘ETF Rule’.

The new listings – on NYSE Arca – are the ETFMG Prime 2x Daily Junior Silver Miners ETF (SILX US) and ETFMG Prime 2x Daily Inverse Junior Silver Miners (SINV US), and the ETFMG 2x Daily Travel Tech ETF (AWYX US).

The ETFs essentially provide 200% or -200% daily exposure to the strategies of two existing ETFMG funds – namely the ETFMG Prime Junior Silver Miners ETF (SILJ US) and the ETFMG Travel Tech ETF (AWAY US).

The leveraged ETFs deliver this target exposure by investing all or a portion of their assets in derivatives, principally swaps, referenced either to the corresponding delta one ETF or directly to the underlying index.

The short fund may also use derivatives, such as swaps, to achieve its exposure target or, alternatively, may enter directly into short positions in the corresponding ETF.

Specifically, SILX and SINV provide exposure – long or short respectively – to the Prime Junior Silver Miners & Explorers Index. This index reflects the performance of a basket of small-cap companies that are active in the silver mining exploration and production industry.

AWYX provides long exposure to the Prime Travel Technology Index. This index reflects the performance of a basket of companies that are a subset of the global travel and tourism industry and provide internet-based technology to facilitate bookings and reservations, ride-sharing and hailing, travel price comparison, and travel advice.

The ETFs only seek to achieve their amplified performance objective over a period of a single day. For periods greater than one trading day, performance will be the result of each day’s returns compounded over the period. This is very likely to differ from 2x or -2x the performance of the reference index, particularly over longer periods of time and after the impact of fees and expenses.

In terms of fees, all three ETFs come with expense ratios of 0.95%. On top of this, investors will incur costs associated with the derivatives, chiefly swap fees. For the long silver ETF, swap costs are estimated at 1.6% annually. For the travel tech ETF, these costs are estimated at 2.6%. Derivative fees on the short silver ETF have not explicitly been estimated in prospectus documents.

Commenting on the launch, Sam Masucci, CEO and Founder of ETFMG, said: “We’re very excited to be the first issuer to provide investors a way to gain leveraged exposure to some of our existing first-to-market thematic ETFs. There is clear demand for leveraged ETFs, and these new products will give traders the means to access high-growth themes with magnified exposure.”

Kris Monaco, Managing Partner of Level ETF Ventures, owner of Prime Indexes, added: “Thematic and innovative index creation is at the heart of our company, and we are delighted that ETFMG has selected Prime Indexes to support the growth of its ETF suite. We are proud to expand our relationship with ETFMG, and confident that its new leveraged ETFs will benefit from the success already achieved in those same themes.”

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