This week's exchange-traded product listings read like a psychological case study in investor temperament. On one side: a parade of leveraged products that treat volatility like a feature, not a bug. On the other: L&G's Market Neutral ETF, which treats volatility like something that happens to other people.
Let me walk you through what I can only describe as the ETF industry's Rorschach test.
Leverage Shares has been busy. This week's listings include a 3x Long Robinhood ETP, which is genuinely poetic. You can now use a leveraged product to bet on the company whose user base famously discovered what leverage does during the meme stock era. It's financial ouroboros. The snake eating its own tail, but at three times the speed.
There's also a -3x Short MicroStrategy product, for those who look at Michael Saylor's Bitcoin conviction trade and think: “I would like to express my disagreement with this man's life choices, but I need the disagreement to be amplified.”
And the -3x Short Magnificent 7 ETP continues its cross-listing journey across European venues. This is a product that lets you triple-short Apple, Microsoft, Nvidia, Amazon, Alphabet, Meta, and Tesla simultaneously. It's not investing so much as it's making a theological statement about the sustainability of American tech dominance. With leverage.
The thesis behind these products is straightforward: if you're going to be right, you want to be really right. And if you're wrong? Well, at least it'll be over quickly.
Then there's L&G's Market Neutral ETF (CMNG), which takes a fundamentally different view of what an investment product should do. The strategy aims to deliver returns uncorrelated to market direction. When markets go up, it tries to make money. When markets go down, it also tries to make money. When markets go sideways, same deal.
This is the ETF equivalent of bringing a sensible sedan to a drag race. While everyone else is arguing about whether to install a bigger turbo or more nitrous, the market neutral fund is checking its tire pressure and asking if anyone wants to split the cost of parking.
The product won't make you rich in a bull market. It also won't vaporize your capital in a correction. It is, by design, boring. And in finance, boring is a feature that's chronically underpriced.
What we're really seeing is two completely incompatible views of what investors want from their portfolios.
The leveraged products assume you have a view, you're confident in that view, and you want maximum expression of that view. They're tools for speculation. Calling them “investments” is technically accurate but spiritually misleading. These are instruments for people who check futures at 4am and feel emotions about it.
The market neutral approach assumes you'd rather harvest small, consistent returns than swing for the fences. It's for people who've read about sequence-of-returns risk and found the concept personally offensive. It's for allocators who view correlation as a four-letter word.
Neither approach is wrong. They're just built for completely different psychological profiles and use cases.
The 3x products are transparent about what they are. The disclosures are clear. The mechanics are understood. If you lose money in a -3x MicroStrategy short while MSTR rallies on Bitcoin enthusiasm, that's not a product failure. That's the product working exactly as designed. You made a bet. The bet was wrong. The leverage made it more wrong.
Meanwhile, market neutral strategies have their own risks: manager skill dependency, the potential for “neutral” to mean “neutrally losing money to fees,” and the opportunity cost of not being long during extended bull runs. There's no free lunch. There's just lunch with different ingredients.
This week's listings are a reminder that the ETF industry will build a product for every possible investment thesis, including mutually exclusive ones. The same data feed that brought us 3x Long Robinhood also brought us a strategy explicitly designed to not care what Robinhood does.
And somewhere, there's probably an allocator considering putting both in the same portfolio, which would be the most aggressively centrist position in financial history.
Choose your fighter. Or don't. The ETF industry has a product for that too.