The European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) recently published a warning about the dangers of investing in contracts for difference (CFDs), where losses can exceed an investor’s initial investment. The warning highlights the benefits of leveraged long and short exchange-traded products (ETPs), which provide an attractive, risk-controlled alternative to CFDs and spread betting.

While the US dollar is still the primary global currency, its long-term dominance is less certain, according to a report by the World Gold Council. With the dollar in apparent secular decline, central banks are reducing allocations to the currency while increasing purchases of traditional assets, such as gold. Investors looking to follow suit can access gold via physical ETPs, which combine the advantages of physical ownership with the liquidity, transparency and ease of execution typical of an ETF.

Leveraged exchange-traded funds (ETFs), which provide magnified exposure to various financial markets, have provided everyday investors with powerful hedging and speculative trading instruments that were once the reserve of institutional investors. These instruments typically provide two or three-times exposure – long or short – to a specific index tracking equities, bonds, commodities or currencies.

ProShares, a leading US-based provider of alternative exchange-traded funds (ETFs), has launched the ProShares Global Listed Private Equity ETF (PEX), a new ETF providing exposure to companies that invest in private unlisted companies. The BATS-quoted fund tracks the LPX Direct Listed Private Equity Index, a portfolio of up to 30 listed private equity companies worldwide whose primary business is direct investments in private equity.

Exchange rate volatility has spiked considerably over the past two months following the election of a new government in Japan. With murmurings that a “currency war” is about to break out, volatility in the FX market looks destined to remain at elevated levels for some time to come. This creates opportunities for investors looking to speculate on further shifts in the market. An effective way to capitalise on FX moves is via leveraged currency exchange-traded products (ETPs) which amplify the returns of currency pairs such as USD/JPY, GBP/USD, GBP/EUR and EUR/USD.

Market Vectors Index Solutions has introduced the Market Vectors US Treasury-Hedged High Yield Bond Index, a new bond strategy index reflecting the performance of a long position in high-yield corporate bonds and a short position in US Treasuries. The index comes at a time when investors are becoming increasingly conscious of the potential negative impact of interest rate rises on bond returns but are nonetheless still keen to exploit the enhanced income associated with high-yield debt.

Risks continued to ease in the fourth quarter of 2012, with no signs of a reversal ahead, according to risk specialists Axioma. Melissa Brown, Senior Director of Applied Research at Axioma, said: “The decline in risk should give investors the opportunity to focus on achieving active returns.” With predicted risk considerably reduced, now could be the time for risk tolerant sophisticated investors to consider tactically adding a degree of leverage to their portfolios via leveraged exchange-traded funds (ETFs) offering geared exposure to various markets.

Declining bond yields have created the potential for a ‘bond bubble’ under which rising interest rates could result in significant losses for fixed income investors, according to Fitch Ratings. So how should investors handle this? One option is to get out of bonds altogether. But, considering the diversification role bonds play and the income they offer, this is not entirely sensible or indeed practicable. A more moderate response would be to focus on shorter-duration bonds, which are less sensitive to interest rate rises.

The ProShares Merger ETF (MRGR), an innovative new fund from US-based alternative exchange-traded fund (ETF) specialist ProShares, is scheduled to list on the BATS Exchange on 13 December. The fund is designed to track the performance of the recently launched S&P Merger Arbitrage Index, a risk arbitrage strategy that exploits commonly observed price changes associated with a global selection of publicly announced mergers, acquisitions or other corporate reorganisations.

Boost ETP has revealed plans to launch a suite of triple-leveraged long (3x) and short (-3x) exchange-traded products (ETPs) on the London Stock Exchange. The company expects to list up to 100 ETPs in the next two years, starting with a broad range of equities and commodities. Aimed at sophisticated and experienced investors, leveraged long and short ETPs provide instant leverage to underlying markets in one single trade, making it possible to accentuate and exploit opportunities in sideways-trending markets.