How do L&I Products differ from ETFs?
Some investors may wonder about the differences between leveraged and inverse products
(L&I Products...
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Portal-Investment
Article
08/05/2019
How do L&I Products differ from ETFs?
Some investors may wonder about the differences between leveraged and inverse products (L&I Products) and exchange-traded funds (ETFs). Both L&I Products and ETFs are index-tracking in nature, but they are different in many respects.
Understanding the difference between leveraged products, inverse products and ETFs will help you identify suitable investment products that meet your investment objectives and risk appetite.
| Leveraged products | Inverse products | ETF | |
|---|---|---|---|
| Investment objective | Seek the daily return equivalent to a multiple of the underlying index return | Seek the daily return equivalent to a multiple of the inverse return of the underlying index | Replicate/mirror the performance of the underlying index |
| Use of leverage | Yes, leverage factor capped at two times in Hong Kong | Yes, leverage factor capped at two times in Hong Kong | No, leverage factor is not applicable |
| Rebalancing frequency | Daily | Daily | Depends on the index methodology |
| Target investors | Sophisticated trading-oriented investors | Sophisticated trading-oriented investors | General investors |
| Investment holding period | Short term (not intended for holding longer than one day) | Short term (not intended for holding longer than one day) | Long term |
| Termination | As and when determined by the product issuer Must be terminated if all market makers have resigned |
As and when determined by the product issuer Must be terminated if all market makers have resigned |
As and when determined by the product issuer |
8 May 2019
