New ETFs Could Provide 200% Leverage – With A Twist

By Tom Lydon on July 21, 2009 | More Posts By Tom Lydon | Author's Website

A new leveraged exchange traded fund (ETF) provider has filed with the Securities and Exchange Commission (SEC). The filing is for some ETFs that could prove to deliver an interesting twist on the concept of this type of fund. FactorETF Trust would aim to provide 200% of the daily return of an underlying index. However, the proposed ETFs to launch first would be based on underlying indexes that measure their respective sector and/or asset class against broader markets, explains Murray Coleman for Index Universe.

One example Coleman gives is the FactorETF 2x REIT Shares, which is described as attempting to provide 200% of the daily excess return of U.S. real estate investment trust stocks vs. the broader domestic stock market. The same is true for other funds in the filing, including one for gold, stocks vs. U.S. government bonds and short-duration government bonds vs. long-term issues. Other asset classes being leveraged by competing indexes include:

* Treasury Inflation-Protected Bonds (TIPS) vs. nominal Treasuries
* Nominal Treasuries vs. TIPS
* Bonds vs. stocks