Leveraged and Inverse ETFs

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On behalf of a financial institution, Cornerstone Research examined investor trading activity in leveraged and inverse ETFs.

Cornerstone Research was retained by a financial institution to assist with an internal investigation of investor trading activity and gains/losses in leveraged and inverse exchange-traded funds (ETFs).

We examined and analyzed participant-level transaction data to determine the extent of investor trading in these ETFs, the popularity of different funds, the variation and impact of holding periods on investor returns, and individual and aggregate gains and losses. We also analyzed the use of margin accounts, developed scenarios to demonstrate the impact of daily re-leveraging on the returns of leveraged and inverse ETFs, and calculated internal rates of return for all investors with trading activity in these funds.

We presented our findings to company management.


For more information on this case, contact Yesim Richardson or John Simon.

  • Boston

Yesim C. Richardson

President

  • Chicago

John P. Simon

Vice President