We could do without another blow-up.
BlackRock’s Laurence D. Fink, who oversees the world’s biggest exchange-traded fund lineup, said leveraged ETFs are a structural problem and have the potential to 'blow up' the industry.
'BlackRock would never do a leveraged ETF', Fink said in a question-and-answer session with Deutsche Bank co-chairman Anshu Jain Wednesday in New York. Fink said he doesn’t understand why the U.S. Securities and Exchange Commission allows them to operate.
Bloomberg News reports that ETFs, which have turned into one of the most popular investing vehicles over the past decade, have become increasingly complex as firms try to appeal to a more diverse base of investors. While the majority of ETFs mimic indexes, leveraged versions use swaps or derivatives to try to amplify daily index returns. Leveraged and inverse ETFs have come under scrutiny over several issues since 2009, the year the SEC warned brokers and investors that the vehicles weren’t appropriate for long-term investors.
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