Tuttle launches inverse leveraged regional banks ETF

Jan 5th, 2024 | By | Category: Equities

Tuttle Capital Management has introduced a new tactical ETF offering investors a means to capitalize on downturns in the US’s regional banking sector.

Matthew Tuttle, CEO & CIO, Tuttle Tactical Management.

Matthew Tuttle, CEO of Tuttle Capital Management.

The Tuttle Capital 2x Inverse Regional Bank ETF (SKRE US) has been listed on Nasdaq with an expense ratio of 0.75%. It represents the first ETF in the US to specifically short regional banking stocks.

The fund uses swaps to deliver twice the inverse daily performance (-200%) of the SPDR S&P Regional Banking ETF (KRE US), a $3.9 billion fund that tracks the S&P Regional Banks Select Industry Index.

The index consists of US-listed stocks with market capitalizations above $300 million that are classified to the ‘Regional Banks’ sub-industry according to the Global Industry Classification Standard.

Constituents are initially equally weighted and then adjusted by a liquidity factor that ensures no stock’s weight exceeds the value that can be traded in a single day for a theoretical portfolio value of $2 billion.

As of the end of December 2023, the index contained 140 constituents with the top ten names accounting for 38.1% of the total weight.

The global banking sector experienced significant upheaval last year, initiated by the collapse of Silicon Valley Bank (SVB) in the US in March 2023 due to a bank run. Although regulatory authorities quickly intervened to mitigate the crisis, the ripple effect of this failure incited a wave of uncertainty, resulting in the subsequent downfall of two more financial institutions – Signature Bank in the US and Credit Suisse in Europe.

Matthew Tuttle, CEO of Tuttle Capital Management, highlighted that the Federal Reserve’s sustained high-interest rate policy, coupled with looming challenges in the commercial real estate sector, might propel further regional banks toward bankruptcy in 2024.

Tuttle said: “These guys are not too big to fail; when they start to have problems, things can spiral quickly, and nobody is going to bail them out. This product is in line with our goal of providing innovative and necessary trading tools to individual investors.”

Investors should note that inverse and leveraged ETFs are only suitable for sophisticated traders who understand the risks involved. Specifically, these products are not suitable as buy-and-hold investments as they tend to decay in value if held for an extended period, potentially leading to significant losses, especially in volatile but range-bound markets.

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