Short and Leveraged ETPs provide robust, transparent, collateralised,
secure, and cost-efficient exposure to underlying indices, commodities, and
individual stocks, while retaining the accessibility and trading of
ordinary shares.
ETPs are traded on stock exchanges throughout the day just like a share,
enabling investors to gain exposure to a wide range of investments with a
single trade. They bring certain features that make them compelling for
investors and below we highlight some of the benefits of ETPs for
investors:
Benefits:
Buy/Sell Flexibility: Leverage Shares ETPs are traded on the major UK &
European stock exchanges, allowing investors to buy and sell during local
trading hours. ETPs can be traded individually, just like a share in a
SIPP, ISA, or regular dealing account. Entry and exit in ETPs is the same
as in shares, with a corresponding two-day settlement period.
Diversification: ETPs can help Investors diversify their portfolio across
asset classes, sectors and geographies that otherwise could be difficult to
access. For example, Leverage Shares ETPs cover market indices, specific
market sectors, commodities, and specific companies. Using ETPs, investors
can quickly and easily add to or build a portfolio that covers many
different asset classes and geographies.
Cost Efficiency: ETPs are cost effective on many levels. The first level of
cost efficiency comes down to the fees charged by the ETP provider. ETPs
are usually able to achieve lower operating costs and offer lower
management fees than other forms of leveraged instruments like CFDs and
factor certificates.
Liquidity: ETPs are traded on exchanges, therefore in normal market
conditions investors can buy and sell ETPs throughout the day. This
intra-day liquidity enables investors to quickly move in or out of a
market. Like with traditional ETFs, investors are better off looking
through the underlying instrument for true indication of liquidity.
Leverage: Gain amplified exposure to the daily performance of the
underlying asset.
Directional: Availability of long or short positions for directional
investment or hedging.
Access: ETPs provide access to a wide range of underlying assets.
Risk Management: In extreme market conditions where markets move
dramatically, losses can be significantly reduced by the Air Bag Mechanism
built into Leverage Shares ETPs.
Loss limited to the capital invested: The maximum loss an investor can
incur is the amount invested – nothing more.
Risks:
As with any investment, ETPs involve risk. The higher the expected return
of an investment, the higher the risk and the greater the variability of
returns. Consideration should be given on how an investment in ETPs fits
the overall investment portfolio as ETPs have specific risks that investors
should be aware of.
Market risk: Market conditions (for example, a lack of liquidity in
volatile markets) may make it difficult to buy or sell ETPs in certain
circumstances. At times the return of an ETP may deviate from the return of
the tracked index or benchmark.
Regulatory and tax risk: Risk that a government or a regulator may
introduce regulatory or tax changes which can affect the value of
securities in which the ETP invests, the value of the ETP units or the tax
treatment of the ETP.
Capital risk: Capital is fully at risk and is not covered by the provisions
of the Financial Services Compensation Scheme (“FSCS”), or any similar
scheme.
Leverage risk: If an investment results in a loss, such a loss will be
increased by 2, 3 or 5 times, depending on the leverage used, which is
greater than a direct investment in the underlying asset.
Currency risk: If the underlying asset is quoted in a currency different
from the listing currency, exchange rate fluctuations between these
currencies would impact the price of the product (unless the product
incorporates a currency hedge).
Compound returns: Gains and losses are compounded over periods of more than
one trading day, and as such will deviate from the leveraged performance of
the underlying asset.
Counterparty / Issuer risk: If the issuer were to default or become
insolvent, the product will terminate. The amount investor would receive
back depends on the value of a basket of collateral assets. That said,
Leverage Shares ETPs are fully collateralised and have a 3rd party Trustee
that acts independently for the benefit and in the interest of
securityholders minimising credit risk.
Liquidity risk: ETPs may be susceptible to liquidity risk. Their liquidity
will generally correlate to the liquidity in the market for the underlying
asset. Therefore, if the market for the underlying becomes illiquid, it is
likely that the ETP product will also become illiquid.
Prepayment risk: Leverage Shares reserves the right to make adjustments or
substitutions, or even prepay the product, especially in case of events
affecting the underlying asset. The early redemption of the product may
result in total or partial loss of the amount invested.
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