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Leverage Shares to Launch Single Stock ETFs in the US
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Leverage Shares, a pioneer in European leveraged and exchange-traded products, has filed to launch 13 single-stock ETFs in the United States, according to a regulatory filing.
Seven 2x Long ETFs will double the daily return of Apple, AMD, Dutch semiconductor company ASML Holding, Boeing, Coinbase, Nvidia and Tesla, according to the filing. The remaining six ETFs will seek twice-inverse exposure to British semiconductor company Arm Holdings, Meta, Microsoft, Nvidia, Taiwan Semiconductor Manufacturing Company and Tesla.
About $5.3 billion of the $7.4 billion in U.S. single-stock ETFs is in products that track the performance of Nvidia and Tesla from issuers including Direxion, GraniteShares and YieldMax, as of April 30, according to data from Morningstar Direct.
The Leverage Shares ETFs will be the first U.S. single-stock ETFs to follow Arm Holdings, ASML Holding and Taiwan Semiconductor Manufacturing Company, according to Morningstar data.
Leverage Shares launched its first ETP on the London Stock Exchange in 2017, the company’s website notes.
The company had $168 million in its European single-stock ETPs as of May 31, according to Morningstar data. These funds brought in $58 million in the year then ended.
Combined, 61 single-stock ETFs from AXS, Direxion, GraniteShares, Innovator ETF, Kurv ETF and YieldMax generated $4.5 billion in net inflows in the fiscal year ended April 30, according to Morningstar data .
But there is still room for another entrant in the leveraged and single-stock space, especially given its size relative to the $7 trillion ETF space, said analysts.
“It doesn’t surprise me that leveraged stocks are doing this, given their success in Europe,” said Amrita Nandakumar, president of Vident Asset Management.
An ETF that seeks twice Tesla’s daily performance will be functionally identical to other 2x Tesla ETFs, she said. To stand out from the pack, Leverage Shares will instead need to rely on its European experience, marketing and potentially try to reduce fees for legacy single-stock ETF issuers, she added.
Leverage Shares did not disclose fees for its planned ETFs and did not respond to requests for comment.
Among other issuers, the majority of single-stock ETFs charge fees just north of 100 basis points, according to prospectuses.
But Morningstar senior analyst Ryan Jackson isn’t convinced fees would play a significant role in whether investors buy single-stock ETFs. Because ETFs are aimed at day traders and are not intended to be buy-and-hold products, investors tend to be “fee agnostic” regarding the products, he said.
“These leveraged ETPs are similar to index funds in that all they have to compete on is price, tracking error, bid/ask spread, and to a lesser extent there can be some brand affinity,” said Matt Apkarian, research analyst at Cerulli Associates. “There may be room for more than one manager, but they are splitting hairs as to how they will be able to differentiate themselves.”
Since Leverage Shares is currently only present outside the United States, the company could hope to draw attention to its brand, where investors can seek four times and five times leverage for its products on non-U.S. exchanges, he noted.
“Companies that have established products in the United States will benefit from tighter bid/ask spreads due to higher volume, so it may be difficult to attract traders to these substantially similar products unless they have better tracking error or lower fees,” Apkarian said. .