Leveraged and Inverse ETPs Closures

The securities attorneys at Morgan & Morgan’s Business Trial Group are investigating investment losses in Exchange Traded Products (ETP) that recently closed after suffering massive losses this year.   

Amidst the markets’ extreme volatility in 2020, an unusually high number of Exchange Traded Funds (ETF) and Exchange Traded Notes (ETN) have closed.  Many of the ETFs and ETNs that have closed were leveraged or inverse products. 

Leveraged and inverse ETPs are extremely high-risk investments that typically are suitable only for the most speculative of investors.  As we have previously discussed on this site, while leveraged ETPs can produce outsized gains when the underlying index increases in value, they also can produce massive losses in bear or volatile markets. Inverse ETPs seek to achieve returns that are in the opposite direction of an underlying index.   

Many investors may not realize that leveraged or inverse products can lead to results that are different from a simple doubling, tripling, or inverse of the underlying benchmark’s return.  This occurs because these products re-balance on a daily or monthly basis and the compounding math.  The results may be amplified in volatile markets.  These products are not suitable for investors who intend to buy and hold them.

Over 90 ETPs have closed in the first quarter of 2020. Many of those ETPs were leveraged or inverse products that sustained tremendous losses.  Some of the ETPs that have closed are as follows:

• ETRACS 2x Leveraged Long Wells Fargo Business Development Company Index ETN; 
• ETRACS Monthly Pay 2x Leverage Dow Jones Select Dividend Index ETN; 
• ETRACS Monthly Pay 2x Leveraged MSCI US REIT Index ETN; 
• ETRACS Monthly Pay 2x Leveraged Closed-End Fund ETN; 
• ETRACS Monthly Pay 2x Leveraged Diversified High Income ETN; 
• ETRACS Monthly Pay 2x Leveraged Mortgage REIT ETN; 
• ETRACS Monthly Pay 2x Leveraged Wells Fargo MLP Ex-Energy ETN; 
• ETRACS Monthly Pay 2x Monthly Leveraged S&P MLP Index ETN Series B; and
• ETRACS Monthly Reset 2x Leveraged ISE Exclusively Homebuilders ETN.
• Columbia Sustainable Global Equity Income ETF
• Direxion Daily MSCI Developed Markets Bear 3x Shares
• Direxion Daily Natural Gas Related Bear 3x Shares
• Direxion Daily European Financials Bulls 2x Shares
• ProShares UltraPro 3x Crude Oil ETF
• Credit Suisse X-Links Monthly Pay 2xLeveraged Alerian MLP Index ETN
• Velocity Shares 1x Long VSTOXX Futures ETN
• ProShares UltraPro Short Financial Select Sector
• Columbia Sustainable Global Equity Income ETF
• Franklin Liberty International Opportunities ETF
• iPath US Treasury Long Bond Bear ETN
• Invesco China Real Estate ETF
• Invesco DWA NASDAQ Momentum ETF
• Invesco Russell 1000 Momentum Factor ETF
• WisdomTree Dynamic Bearish U.S. Equity Fund
• WisdomTree CBOE Russell 2000 PutWrite Strategy Fund

If you invested in an ETF or ETN that recently closed, you may have suffered large losses.  The securities attorneys at Morgan & Morgan’s Business Trial Group are here to help. 

The Business Trial Group is part of the largest contingency law firm in the nation, with more than 700 lawyers and offices nationwide.  We have helped investors recover investment losses totaling tens of millions of dollars. We are only paid if we successfully recover money for you. Please contact us today at 888.251.2668 for a free consultation.