Being big is not enough for hedge funds, whose market is $ 4 trillion. Contrary to expectations, smaller funds are heading the list of top-performing funds for 2019.
Eight of the ten best-performing ETFs currently manage just under $ 100 million, and none of them is managed by a mega manager such as Vanguard Group or BlackRock. But it's not just that common between them. Another thing that connects them is that they all use leverage to inflate their returns.
These smaller successful funds are in the housing and industrial sectors. Funds such as Direxion Investments and ProShare Advisors are targeting this niche and attracting more and more fans.
The Direxion Daily Russia Bull 3x Share Fund has a return of 300% of the daily growth rates of Market Vectors Russia, which is up nearly 80% since the beginning of the year. Two bigger ETFs that track Russian stocks also enjoy good revenue: iShares MSCI Russia Caped ETF and VanEck Vectors Russia ETF, up to now up by about 25%.
But even leverage funds keep the pack, some big institutional players are opposed to using non-traditional ETF strategies because of the high risk they hide. Because of the leverage effect, when they track indexes, they can both bring great profits, but also with fluctuations, to cause great losses. The Credit Suisse Group, for example, stopped one of its own products after wiping nearly 90% of its value in a leap in volatility. Vanguard have forbidden their customers to make new leveraged deals.
Source: Bloomberg Finance L.P.
Graphs: Used with permission of Bloomberg Finance L.P.
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