Exchange traded funds: Investors try to catch 'falling knife' with bets on risky funds during chip rout
Leveraged single-stock ETFs attracted billions of dollars of net inflows even as they plunged during market sell-off
Investors poured billions of dollars into risky leveraged funds tracking semiconductor companies during July and August, even as those products suffered heavy losses, as they tried to position for a possible rebound in the sector. The biggest leveraged exchange traded fund tracking chip stocks – called Direxion Daily Semiconductor Bull 3X Shares – attracted almost $7bn of net inflows during July and the first two weeks of August, according to Morningstar data.
The ETF offers triple-leveraged exposure to the NYSE Semiconductor Index, a group of 30 US chip companies. While the index fell more than 20 per cent from its peak, the fund plunged 70 per cent between its June peak and subsequent low.