VelocityShares, the inverse and leveraged ETF brand of Janus Henderson Group, has launched a suite of ten quadruple-leveraged ETPs on NYSE Arca, each of which is linked to changes in the exchange rate between the US dollar and another G10 currency. The ETPs are a first-of-their-kind offering in the US, following a lengthy debate amongst the country’s regulators over the inherent riskiness of such highly leveraged products.
Nick Cherney, Senior Vice President and Head of Exchange Traded Products for Janus Capital Group.
Each VelocityShares currency ETP is linked to an index created in-house by the firm. Five of the ETPs offer 4x long exposure, reset daily, to the US dollar versus the Japanese yen, euro, pound sterling, Swiss franc or Australian dollar. The other five ETPs take the opposite position and go short the US dollar versus the same currencies.
According to VelocityShares, the new products are intended to provide sophisticated investors with a means of managing their currency exposures and expressing market views.
“This launch further demonstrates our dedication to developing sophisticated ETPs for institutional investors,” said Nick Cherney, senior vice president and head of ETPs for Janus Henderson.
The ETPs and their ticker codes are outlined below. Each comes with a hefty fee of 1.50% and a guarantee from Citigroup.
VelocityShares Daily 4x Long USD vs JPY (DJPY US)
VelocityShares Daily 4x Long USD vs EUR (DEUR US)
VelocityShares Daily 4x Long USD vs GBP (DGBP US)
VelocityShares Daily 4x Long USD vs CHF (DCHF US)
VelocityShares Daily 4x Long USD vs AUD (DAUD US)
VelocityShares Daily 4x Long JPY vs USD (UJPY US)
VelocityShares Daily 4x Long EUR vs USD (UEUR US)
VelocityShares Daily 4x Long GBP vs USD (UGBP US)
VelocityShares Daily 4x Long CHF vs USD (UCHF US)
VelocityShares Daily 4x Long AUD vs USD (UAUD US)
The Securities and Exchange Commission (SEC), the US financial regulator, in May of this year granted approval for the launch of the ForceShares Daily 4X US Market Futures Long Fund and ForceShares Daily 4X US Market Futures Short Fund, which were scheduled to be the country’s first quadruple-leveraged ETPs. The decision was almost immediately reversed with the SEC announcing it needed more time to review the decision (See: “SEC sends mixed message over leveraged ETFs”). The ForceShares products have yet to be launched.
Part of the delay in these products hitting US shores came from concerns voiced by the SEC that retail investors may not fully understand the risks associated with seeking leveraged investment results, and may not actively monitor and manage their positions accordingly. Leveraged products have the potential to erode returns over time thanks to the daily reset feature embedded within them. This may lead to considerable losses in volatile but range bound markets, making the ETP unsuitable as a buy-and-hold strategy.