BetaPro Under Fire for Leverage
Horizons BetaPro, Canada’s largest provider of leveraged ETFs is harshly criticized in a recent report concerning its Bull and Bear line of ETFs. The report from FAIR, a Canadian investor’s rights group, claims that BetaPro does not adequately disclose the risks of investing in in the 2x leverage products. Leveraged ETFs are controversial because many investors mistakenly think they track twice the annual performance of an index, when in fact they are meant to track twice the daily performance.
Tracking daily performance can lead to wide discrepancies in returns between leveraged and non-leveraged funds that track the same index. BetaPro’s funds have posted especially odd returns, like its Gold Bullion Bull (HBU) fund, which was down 3.7 percent last quarter despite bullion itself being up.
BetaPro’’s position is complicated by the fact that there are often no non-leveraged counterparts to its offerings available in Canada, forcing investors to choose leverage if they want to invest in a particular sector.
CEO Howard Atkison is quoted as saying BetaPro’s disclosure is adequate, but that he’d work with FAIR to improve its product warnings.
