Investors lost $25.7bn in leveraged exchange traded funds late last week, in the biggest ever meltdown for risky funds that have drawn huge inflows in recent years from retail traders seeking quick returns.
The high-octane funds, which magnify the daily returns of individual stocks or indices by up to five times, lost almost a quarter of their value on Thursday and Friday as they were hit by Donald Trump’s trade war and the unravelling of financial markets, according to calculations by FactSet.
This eclipsed the previous worst losses on record, two separate days during the March 2020 Covid-19 crash when leveraged ETFs lost $9.1bn and $5.6bn respectively, and the “Volmageddon” of 2018 when an extreme surge in volatility led to large losses for short volatility ETFs.