February 20, 2020
Leveraged and inverse funds are important in managing my portfolio exposures, facilitate cost efficient, liquid hedging opportunities and ultimately encourage greater competitive practices among broader market participants. The diversification benefits inherent to these funds and their constituents are very accessible through leveraged and inverse products, and furthermore, the nature of a fund asset type means exposure is limited to volatility magnitude/direction, not notional capital as would be the case with capturing the same objectives with margin calls on derivatives and short sells. Capital losses are capped to 100%, at a mark of zero. For these reasons, these products offer a wider range of participants access to protect against downside risk and to gain a desired factor exposure with lower capital requirements, amounting to greater financial freedom and competition in the securities markets.