Leveraged ETFs dodge blame for volatility

The US Federal Reserve has warned that leveraged exchange-traded funds could pose a systemic risk through their rebalancing activities, but many exchange-traded fund providers think these claims are overblown

When the US Federal Reserve speaks, people tend to sit up and take notice. So when the central bank published a report warning about the systemic risks posed by leveraged and inverse exchange-traded funds (LETFs) earlier this year, it attracted plenty of attention in the media and among investors.

It is not the first time regulators have expressed concern about the possible systemic impact of the exchange-traded fund (ETF) sector – separate reports from the Bank for International Settlements