Leverage Shares files to launch single-stock ETFs in US

Leverage Shares, a pioneer in European leveraged and single-stock exchange traded products, has filed to launch 13 single-stock ETFs in the US, a regulatory filing shows.

Seven 2x Long ETFs will double the daily return of Apple, AMD, Dutch semiconductor company ASML Holding, Boeing, Coinbase, Nvidia and Tesla, the filing shows. The remaining six ETFs will seek two times inverse exposure to British semiconductor company Arm Holdings, Meta, Microsoft, Nvidia, Taiwan Semiconductor Manufacturing Company, and Tesla.

Some $5.3bn of the $7.4bn single-stock US ETF space sits in products that track the performance of Nvidia and Tesla from issuers such as Direxion, GraniteShares and YieldMax, as of April 30, according to data from Morningstar Direct.

The Leverage Shares ETFs will be the first US single-stock ETFs to track Arm Holdings, ASML Holding and Taiwan Semiconductor Manufacturing Company, data from Morningstar shows.

Leverage Shares launched its first ETP on the London Stock Exchange in 2017, the company website notes.

The firm has $680mn across its European single-stock ETPs, according to Leverage Shares.

Those funds pulled in $58mn during the year ended May 31, Morningstar data show.

Together, 61 single-stock ETFs from AXS, Direxion, GraniteShares, Innovator ETFs, Kurv ETFs and YieldMax pulled in $4.5bn in net inflows during the year ended April 30, Morningstar data shows.

But there is still room for another entrant in the leveraged and single-stock space, especially given its size relative to the $7tn ETF space, analysts said.

“It doesn’t surprise me that Leverage Shares would do this, given their success in Europe,” said Amrita Nandakumar, president of Vident Asset Management.

An ETF that seeks two times the daily performance of Tesla will be functionally identical to other 2x Tesla ETFs, she said. To stand out from the pack, Leverage Shares will instead have to lean on its European experience, marketing and potentially try to undercut the incumbent single-stock ETF issuers on fees, she added.

Leverage Shares did not disclose the fees for its planned ETFs and did not respond to requests for comment.

Across other issuers, a majority of single-stock ETFs charge just north of 100 basis points, prospectuses show.

But Morningstar senior analyst Ryan Jackson is not convinced that fees would play a significant role in which single-stock ETFs investors buy. As the ETFs are meant for day traders and are not meant as buy-and-hold products, investors tend to be “fee agnostic” about 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 then to a smaller extent there may be some brand affinity,” said Matt Apkarian, a research analyst at Cerulli Associates. “There may be room for more than one manager, but they’re splitting hairs in terms of how they’ll be able to differentiate.”

Given that Leverage Shares currently only has a non-US presence, the firm could be hoping to attract some attention to its brand where investors can seek four times and five times leverage in its products on non-US exchanges, he noted.

“Firms that have established products in the US will benefit from tighter bid/ask spreads due to higher volume, so it could be a hard sell to attract traders into these substantially similar products unless they have better tracking error or lower fees,” Apkarian said.