WisdomTree Investments CEO Jonathan Steinberg said leveraged and inverse exchange-traded funds (ETFs) are not toxic though they are getting a “bad rap”, Reuters reports. At a conference on September 12, Steinberg defended leveraged ETFs and said one rap for these ETFs was that they do not deliver the long-term tracking of the index, the other being that they contribute to the volatility. Steinberg said the Securities and Exchange Commission (SEC), which is investigating if leveraged ETFs contributed to recent market volatility, may be looking for a scapegoat. Regulators have been warning of the dangers of owning leveraged ETFs, which seek to amplify returns by using risky debt and derivatives, and inverse ETFs, which employ options strategies to allow investors to short an index.
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