January 21, 2016
Dear Sir/Madam: I am an active investor with more than 30 years of successful investing experience in global capital markets.
I am also a licensed Financial Advisor with one of the largest wealth management firms in North America.
Based on my many years of experience in the investments business I can confidently say that leveraged and inverse mutual funds and ETFs are extremely important and valuable investment vehicles available to investors today.
ETFs and ETNs that offer 2x and 3x long and short exposure to various markets, asset classes, sectors, etc. offer investors the ability to hedge risk in their portfolios and easily achieve much better diversification than what was possible in the past.
Another extremely valuable feature of these products is the ability to strictly limit the amount of risk being taken by investors since investors can't lose more than what they invest in such products (unlike futures and forex trading which involves as much as 10x, 20x and even 50x leverage creating the possibility of big margin calls and thus significantly higher risks for unsophisticated investors).
The SEC should encourage the growth of this industry by allowing companies like Proshares, Direxion, Velocity, etc. to introduce more 2x, 3x, 4x and even 5x leveraged ETFs and ETNs offering leveraged long and short exposure to a wider range of sectors and markets.
While doing this, the SEC's focus should be on continuously ensuring the financial strength, stability and solvency of all the companies offering these leveraged ETFs and ETNs. By introducing and enforcing strict capital adequacy and risk management requirements on all the companies in this industry the SEC will be providing a very valuable service to all prudent investors.
Please feel free to contact me at [email address redacted] if you need any clarification.
Amod P Lokre