MicroSectors Solactive FANG & Innovation -3X Inverse Leveraged ETNs (BERZ)

ETF MicroSectors Solactive FANG & Innovation -3X Inverse Leveraged ETNs (FNGD)

Profile:

Focus: ETF MicroSectors Solactive FANG & Innovation -3X Inverse Leveraged ETNs (FNGD) is an inverse, triple-leveraged exchange-traded note (ETN) that seeks to deliver a return that is 3 times the inverse (or opposite) of the daily performance of the Solactive FANG & Innovation Index. The index tracks the performance of 50 large-cap U.S. companies in the technology sector, including but not limited to Meta Platforms (formerly Facebook), Apple, Amazon, Netflix, and Tesla.

Asset Allocation: FNGD invests primarily in forward contracts to achieve its investment objective.

Investment Strategy: FNGD uses a leveraged short strategy to achieve its investment objective. This means it seeks to profit from declines in the Solactive FANG & Innovation Index. The 3x leverage amplifies both gains and losses.

Objective:

FNGD's primary objective is to provide investors with daily investment results that are -300% of the Solactive FANG & Innovation Index performance. This makes it suitable for investors who anticipate a decline in the technology sector and seek amplified returns.

Issuer:

Company: MicroSectors

Reputation and Reliability: MicroSectors is a relatively small issuer with a limited track record. Its flagship ETNs, focusing on 3x leveraged and inverse strategies, have experienced mixed performance.

Management: The management team at MicroSectors has experience in financial markets and product development. However, their experience managing ETNs specifically is limited.

Market Share:

FNGD is a niche product with a small market share in the broader leveraged and inverse ETN market.

Total Net Assets:

The total net assets under management for FNGD are approximately $61 million as of October 26, 2023.

Moat:

FNGD's main competitive advantage is its focused exposure to the technology sector and its 3x leverage, which attracts investors seeking aggressive exposure to the sector. However, the niche focus and leveraged nature also increase risk.

Financial Performance:

Historical Performance: FNGD has seen significant volatility in line with its leveraged strategy. Its performance depends heavily on the direction of the underlying Solactive FANG & Innovation Index.

Benchmark Comparison: FNGD's performance has often deviated from its benchmark index due to its leverage. In declining markets, FNGD tends to outperform its benchmark, while in rising markets, it underperforms.

Growth Trajectory:

FNGD's growth trajectory is largely dependent on the performance of the technology sector and investor sentiment towards leverage.

Liquidity:

Average Trading Volume: FNGD has a relatively low average trading volume, making it less liquid than broader market ETFs.

Bid-Ask Spread: The bid-ask spread for FNGD is typically wider than that of larger, more liquid ETFs, resulting in higher transaction costs.

Market Dynamics:

Factors affecting FNGD's market environment include:

• Technology Sector Performance: The performance of the technology sector significantly impacts FNGD's returns.
• Interest Rate Environment: Rising interest rates can lead to increased volatility in the technology sector, affecting FNGD.
• Investor Sentiment: Investor sentiment towards leveraged and inverse products can influence the demand for FNGD.

Competitors:

Key competitors of FNGD include:

• Direxion Daily Technology Bull 3X Shares (TECL)
• ProShares UltraPro QQQ (TQQQ)
• VelocityShares Daily Inverse Technology Sector ETN (RYI)

Expense Ratio:

FNGD's expense ratio is 0.95%, which is higher than the average expense ratio for ETFs.

Investment Approach and Strategy:

Strategy: FNGD aims to achieve its investment objective by utilizing forward contracts to gain short exposure to the Solactive FANG & Innovation Index.

Composition: FNGD primarily invests in forward contracts on the Solactive FANG & Innovation Index.

Key Points:

• FNGD is a leveraged and inverse ETN focusing on the technology sector.
• Aims to deliver -300% of the Solactive FANG & Innovation Index performance daily.
• Suitable for investors anticipating a decline in the technology sector and seeking amplified returns.
• Comes with increased volatility and risk due to its leveraged nature.

Risks:

• Volatility: FNGD's leveraged strategy amplifies volatility, leading to significant price fluctuations.
• Market Risk: The performance is tied to the technology sector, which can be more volatile than the broader market.
• Counterparty Risk: FNGD relies on the creditworthiness of its counterparties for forward contracts, exposing it to potential losses.
• Issuer Risk: As an ETN, FNGD is a debt security, and its value depends on the issuer's creditworthiness.

Who Should Consider Investing:

• Sophisticated investors with a high-risk tolerance who seek short-term exposure to potential declines in the technology sector.
• Investors comfortable with amplified volatility and potential losses.
• Investors who understand the specific risks associated with leveraged and inverse investment products.

Fundamental Rating Based on AI:

6.5/10

The AI-based rating system considers FNGD's financial health, market position, and future prospects. While the leveraged strategy offers potential for amplified gains, it also comes with significant volatility and risk. The limited issuer track record and niche focus also contribute to the moderate rating.

Resources and Disclaimers:

Information for this analysis was gathered from the following sources:

• MicroSectors website
• Yahoo Finance
• ETF.com

This information is for educational purposes only and should not be considered financial advice. Investing in leveraged and inverse investment products carries significant risks and is not suitable for all investors.