Meet the King of Performance: TECL ETF

Bloomberg

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00:00So you think about that performance stat, 48,000%.

00:04That's not bad. That's not bad.

00:06Not bad. Not rookie numbers there.

00:08Is anyone holding a fund like this, like that?

00:10Or is it more used as a trading tool, as Eric said?

00:14Yeah, I mean, look, first and foremost, if you don't understand how leverage works,

00:17then let's start with education.

00:18Come to direction.com. We'll teach you how it works.

00:21Traditionally, most of our traders are just that.

00:24They're traders. They're not really holding on to these things for that long.

00:26But for sure, there's going to be people in some of these ETFs, and there are,

00:30that have held since the beginning.

00:32And we see that. I mean, even our own materials, we would always say,

00:35look at one-day performance. Look at one-week performance.

00:38That's about what you should be doing. Reset, reset.

00:40We've got maybe four or five ETFs that are up almost 400% year-to-date.

00:45So if you bought them Jan 1 and you had them until now, you'd be up 400%.

00:49We also have ones that have gone the other way, right?

00:51So generally speaking, while traders are using these actively,

00:55there are going to be people who are going to try and stay with the momentum.

00:59And the trend can be your friend, both to the upside and the downside.

01:02And so they will sit a little bit longer in some of these ETFs.

01:04Do you have a breakdown of how many people are in it day in and day out

01:07versus those who might be holding on to it?

01:09The best we can do is look at turnover.

01:11So we tend to focus a lot on turnover, and we look for what's happening in our funds.

01:15It's hard to see underneath, right?

01:17And it's also hard to see who the – is it you?

01:19Did Scarlett make a trade today, or was it a market maker, or was it a bank?

01:23I'm still working, so it's all.

01:24Yeah, so it's hard to see exactly.

01:26We do the best we can.

01:27That's why we focus so much on the educational side.

01:30Yeah, it's interesting.

01:31When you look at all the volume in ETFs, that $55 trillion I showed,

01:3510% of that's leveraged ETFs, but they only make up 1% of assets.

01:38So I'd say they're being used as directed.

01:40People are trading them a lot.

01:42When you look at these, I think that a lot of normal vanilla investors

01:46actually have a little side account in which to have some funds, speculate.

01:50Is that what you're finding, too, or is it more young people who are just full to Jed?

01:54No, I would agree.

01:55I think you've got traditional institutional investors, family office-level investors

02:00that are really long-term strategic holders.

02:04Let's be honest.

02:04The markets are exciting, right?

02:06Why are we all tuning in every day to Bloomberg TV?

02:08We want to know what's going on.

02:09We want to be excited.

02:10So every investor we're seeing, even the ones that are at the institutional level,

02:14they're carving out a certain portion of their portfolio called a satellite holding,

02:18what have you, where they allocate dollars to trade the markets.

02:21It's an exciting time to trade.

02:23The markets have performed really well with a lot of volatility.

02:26So if you're a trader around volatility, these are the perfect markets.

02:29This is direction weather.

02:30It's been direction weather for a few years now, but certainly this year has been direction weather.

02:34Well, let's talk a little bit about how far leverage can go,

02:37especially when it comes to the single-stock ETF space.

02:40We were talking about this with Todd Rosenbluth a little bit earlier,

02:43that you think about a letter that you and some of your peers got from the SEC last week,

02:48basically the SEC saying that it's not going to move forward with reviewing proposed applications

02:53for three times and five times leveraged products until key issues are addressed.

02:58And I'm curious, you know, what you do from here.

03:01Are you going to come back with revised proposals or are you going to say this is a line in the sand

03:06that the SEC doesn't want to cross?

03:08Yeah, look, direction most people don't.

03:09We launched our first leveraged ETF in 2008.

03:12We're one of the largest providers out there.

03:14There was a lot of rulemaking that happened around the derivatives rule that really put everything back to 2x,

03:20grandfathered in the 3x, so we can talk about TechL and some of our other ETFs.

03:24But really everyone since that point has only been able to do 2x.

03:27The ETF industry, as we all talk about every day, is the fastest growing industry with the smartest people in finance right now.

03:35Smart people look at rules and they find ways to try and progress the industry forward.

03:40A lot of us filed for 3x products.

03:43You've had a few filings out there for 5x.

03:45You know, the SEC came back and said, eh, doesn't fit the rule.

03:49I think the SEC said, appreciate that everybody's trying to be a little bit smart here,

03:53but let's look at the math and let's see how it makes sense.

03:56So our expectation is people tried, the SEC said no, and we move on.

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