Wall Street ETFs have grown in size, with nearly 3,000 products and $6.2 trillion in assets. But a new era may have begun, despite regulators calling for retail investors not to buy.
The first leveraged single-stock ETFs in the U.S. launched last week, and AXS Investments launched the first eight-stock ETFs that allow investors to invest in Tesla (TSLA-US), Nvidia Corp. (NVDA-US) and PayPal Holdings Inc. ( PYPL-US) to make inverse or leveraged bets.
Some investors already took advantage of leverage on Friday (15th). For example, Nike (NKE-US) rose 1.4% on Friday, and the AXS 2X NKE Bull Daily ETF (NKEL) even outperformed expectations, rising 4.5%. Because AXS uses financial derivatives contracts to achieve leverage, there are usually some small differences between design performance and actual conditions.
But investors who snapped into Tesla were thwarted on the first day, with Tesla up 0.7% on Friday and the short-selling AXS Tesla Bear Daily ETF (TSLQ) down 0.6%.
It’s important to note that buying an ETF involves paying a regular fee to the ETF manager, which is one thing that makes this type of ETF more risky than buying stocks outright.
However, Chris Murphy, co-head of derivatives strategy at Susquehanna International Group, said that for many retail investors, shorting stocks is more difficult, so this short ETF is a less risky and easier to execute shorting option. It’s also worth watching to see how much this affects Tesla’s bearish position.
AXS applied for 18 ETFs, but has now only launched eight, the filings show. GraniteShares, Direxion and some smaller fund houses are also looking to bring single-share ETFs to market. At least 85 more of these ETFs are expected to launch, involving some 37 companies.