Leveraged ETF
& Inverse ETF –
Now available in
Malaysia

Make The Most of
The Market In Any Condition

Leveraged and Inverse ETFs are two types of ETF products created with the aim of
producing a targeted, multiple return of the underlying index on a daily basis.

Leveraged ETF

In the finance world, “leverage” is a technique that amplifies an investor’s profits or losses. Therefore, a leveraged ETF means the fund aims to provide amplified returns of the daily performance of the index.

So if the market index rises by 1% on a given day, then a 2x leveraged ETF should rise by 2% on that day. However, if the index falls by 1% on that day, the 2x Leveraged ETF would go down by 2%.

*All percentage returns reflected are for illustration purposes only, and are before fees and expenses calculations. They do not represent actual results.

Inverse ETF

The word “inverse” simply means the “opposite”. Thus, in this case, inverse ETF means the fund aims to provide return or performance that is the opposite of the daily performance of the index.

So if the index drops by 1% on a given day, then a 1x inverse ETF should rise by 1% on that day. Conversely, if the index is up by 1%, then the 1x Inverse ETF would decline by 1% on that day.

*All percentage returns reflected are for illustration purposes only, and are before fees and expenses calculations. They do not represent actual results.

Benefits of Leveraged and /
or Inverse (L&I) ETFs

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L&I products allow investors to gain profit in either bull or bear markets.

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Investors can enjoy leverage without being provided any margin (Leveraged ETF).

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Leverage effect means less capital at risk (Leverage ETF).

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Investors can hedge or take opportunities during a bear market (Inverse ETF).

Typical ETFs As Compared To
Leveraged and Inverse ETFs

Characteristic ETF Leveraged ETF Inverse ETF
       
Investment objective Replicates / tracks the performance of the index Seeks to provide daily returns equivalent to a multiple of the index return Seeks to provide daily returns to the opposite of the index return
Use of leverage No, leverage factor is not applicable Yes, leverage factor capped at two times (2x) in Malaysia Currently, no, as the leverage factor is capped at one time (1x) in Malaysia
Rebalancing frequency Quarterly of semi-annual, depending on index methodology Daily Daily
Target investors General investors Qualified investors (you need to meet one of the qualifying criteria) Qualified investors (you need to meet one of the qualifying criteria)
Holding period suitability Long term Short term Short term

How They Work For You

Both Leveraged ETF and Inverse ETF usually use a combination of debt and financial derivatives to replicate the daily magnified returns or daily inverse returns of their index.

With the aim being to achieve investment results that usually target the daily returns of the index, most of the Leveraged and Inverse ETFs are structured to rebalance their investment strategies on a daily basis in order to maintain a target leverage ratio.

This means Leveraged and Inverse ETFs are more appropriate for short-term strategies rather than buy-and-hold investments.

For more details of the product, click here

Take advantage of both these products and stand to gain today.

As L&I ETFs work differently compared to the typical ETFs or stocks, only investors who fall under one of these criteria can trade L&I ETFs:

  1. Investors who have utilised a performance simulator which simulates trading in L&I ETFs (available on the issuer's website) and have undergone the video tutorials on L&I ETFs on Bursa Marketplace; OR
  2. Investors who have margin accounts with their Participating Organisations (brokers);
  3. Investors who have made at least 5 transactions in exchange-traded derivatives or structured warrants in the preceding 12 months; OR
  4. Investors who fall under the category of Sophisticated Investors.

A would-be investor needs to submit a declaration to the Participating Organisation / broker on whether they meet any one of the above criteria prior to trading in L&I ETFs.

On top of the above, an investor also needs to accept the risk disclosure statement provided by the broker.