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Boost ETP, a London-based provider of short and leveraged exchange-traded products (ETPs), has unveiled a tutorial and test intended to bolster advisers’ understanding of short and leveraged products.
The tutorial and test, which includes five sets of multiple choice questions, has been designed to assist advisers and investors in understanding the benefits and the risks of investing in short and leveraged ETPs.
The tutorial naturally uses Boost’s products as examples but the knowledge and learning gained can be applied to short and leveraged products of all providers. Successful completion of the tutorial and questions should ensure a good understanding of the intricacies and idiosyncrasies, such as compounding, of these products.
The launch of the tutorial and test builds on Boost’s existing educational toolkit, which includes, among other things, a series of seminars, fact sheets and a return simulator, all of which go some way to address concerns raised by global regulators about the use of leverage by investors who may not fully understand the risks involved.
In Europe, ESMA and the EBA are concerned that during the current period of low investment returns, inexperienced investors across the EU are being tempted to invest in complex financial products (such as CFDs and spread bets), which they may not fully understand and which can end up losing them money they cannot afford to lose.
Hector McNeil, Co-CEO of Boost, commented: “Given short and leveraged ETPs are in the top 10 most-traded ETPs on the LSE (July 2013) there is a clear need for a broader and better understanding of the product by all involved. Concepts such as daily rebalancing and compounding are features of the short and leveraged product and need to be understood. Boost wants to be the driving force behind this.”
He added: “Once advisers and investors better understand short and leveraged ETPs, we think the usage and market for them will grow exponentially, perhaps outstripping standard ETFs. We also feel that investors will start to see short and leveraged ETPs as a better and safer way to trade short and leverage compared to CFDs, spread bets, structured products, covered warrants etc.”