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What is wrong with Inverse ETFs?

Double-edged swords cut both ways

Nicolas Rabener
10 min read
29 Aug 2022

SUMMARY

  • Inverse ETFs come with significant risk disclosure
  • Analyzing the performance of these products justifies the warnings
  • There is a significant difference between performance of inverse ETFs & the inverse underlying indices

INTRODUCTION

In May 2022, Allianz, the large German insurance company, agreed to pay $6 billion in damages to investors and have its U.S. asset management arm plead guilty to criminal proceedings due to the collapse of a few investment funds. These were supposed to create alpha regardless of the market conditions, but lost $7 out of $11 billion under management during the COVID-19 crisis.

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