What are likely outcomes for different kinds of leveraged exchange-traded funds (LETF), which typically use embedded financing and daily rebalancing to target two or three times the daily return of assets they track? In their July 2026 paper entitled "The Costs and Benefits of Leveraged ETFs", Chris Murray and Marco Sammon examine the costs and benefits of LETFs, including those tracking broad indexes and single stocks. Specifically, they:
- Measure aggregate dollar gains/losses across LETFs to determine whether investors have made or lost money.
- For long LETFs with identifiable underlying assets, compare investor gains/losses to those of the unlevered tracked assets.
- Decompose investor LETF returns into product performance, fund selection and investor timing.
Using daily prices and estimated flows for long and short LETFs that have at least $30 million in assets during one month, excluding those that rebalanced monthly or weekly and those that primarily achieve leverage via options, during January 2006 through September 2025, they find that:
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