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Trackers: Inexpensive and Flexible Exposure

Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.

Apple (AAPL) is over $130, Tesla (TSLA) is over $700 and Amazon (AMZN) is north of $3,000. At these prices, it’s very difficult for retail investors to build a portfolio of leading U.S. stocks without a significant outlay of funds. To provide our investors with the means and opportunity to profit from the performance of some of the top-performing stocks today, Leverage Shares brings to you a new suite of products: the Stock Tracker ETPs.

What Are Stock Tracker ETPs?

Stock Tracker ETPs a.k.a. “1x ETPs” give investors 1:1 exposure to the underlying stocks being tracked. While technically similar to “pure beta” ETFs, there is a key difference here: while “pure beta” ETFs offer a 1:1 exposure to a basket of stocks, our 1x ETPs offer exposure to a single company’s stock. When there’s a change in the underlying stock’s value, the investor can expect the 1x ETP’s price to move in the same direction and with a similar magnitude.

Price and Currency Choice Advantages

When it comes to the stocks we had mentioned earlier (as well many other top stocks our 1x ETPs would cover), the price is the biggest barrier to investors looking to cash in their performance. This problem is handily covered by our 1x ETPs: they start at $5 (and its equivalent value in UK £ and EUR). To be precise, for as little as $5, an investor can lock into the performance of these stocks and earn returns that are almost exactly similar to what owing stock would have entailed.

Another issue that dogs investors looking to buy high-performance stocks is that if they’re denominated in US$ and the investor trades in a European currency, they might have to factor in FX rates. Our 1x ETPs are denominated in three currencies – US dollars, Euros as well as British pounds – to give investors increased flexibility in investment choices.

Trading Hours Advantage

Another advantage that 1x ETP has is that, unlike their underlying US-listed stocks, these products are traded during European exchange hours. We had illustrated in an earlier article the limited overlap between US and European exchange hours:

Outside of the overlap hours, the 1x ETP will still remain tradable during the hours the underlying stock isn’t. This gives investors time to factor in after-hours news regarding the underlying stock into their investment decision.

Potential Tax Advantage

Many European jurisdictions offer significant tax advantages through special measures. Let’s take the UK as an example.

About 13.5% of all UK shares were held by individuals in 2019. However, only 3% of the population (about 2.2 million) were subscribed to a stock and shares Individual Savings Account (ISA), which offers significant tax advantages. Investors also held onto their shares for about 0.8 years on average before selling them.

As of 2020, Finder estimated via a survey that over 33% of British respondents owned stocks, with Financial Times estimating a more conservative 15%. In either event, either survey implies that the number of British investors has increased. This makes the case for holding investments in an ISA account all the more relevant.

To illustrate the relative advantage of stock and shares ISAs, let’s consider a stock that has been very popular with European investors in 2020: NIO. NIO had an explosive trajectory all through 2020, rising nearly 1,210% in US$ value by the end of the year. From the 1st of October till the end of 2020, NIO had a rocky ascent until it ended 124% up.

Assume a UK-based investor, Joanne, with an annual income of £60,000. For this income level, the Capital Gains Tax (CGT) is set at 20% with a Capital Gains allowance of £12,300 per year.

Joanne makes only one investment: purchasing 1,000 shares of NIO on the 1st of October via her shares dealing account and holds on to it till the end of the year. After the allowance and taxes, her investment’s performance in UK£ terms is about 103%.

On the other hand, if Joanne had held this investment in a stock and shares Individual Savings Account (ISA), her gains won’t be subjected to CGT. However, American Depositary Receipts (ADRs) like NIO can’t be held in an ISA. Well, our 1x ETP can in fact be held in an ISA. When trading our 1x ETPs, the only fee Joanne would incur would be an annual management fee of 0.15% applied daily.

If Joanne had purchased the 1x NIO Tracker ETP* for roughly the same initial amount, her investment performance would have been 109% with no tax liability or impact on capital gains allowance at all. In fact, it would have gained 109% at any level of investment. This also gives Joanne more flexibility to use the allowance for other equity investments.

*The NIO Stock Tracker’s performance is based on simulated backtested values. The Stock Trackers go live on May 23, 2021.

Some of the most popular stocks among European retail investors in recent times – in addition to the likes of Tesla, Amazon and Apple – have been US-listed Chinese stocks. We offer 1x ETPs for these fast-growing stocks as well:

Physically Backed Products

Investors are doubtless of the latest disaster with the hedge fund Archegos which recently cost leading investment banks billions of dollars when it went under. Archegos bought derivatives known as total return swaps from the banks’ prime brokerage desks to bet on stock price moves without owning the securities. When a stock price slide on ViacomCBS impacted the fund’s portfolio value, Archegos suffered a series of margin calls and tumbles which cost the issuing banks billions.

This scenario cannot happen with our products we offer since our 1x ETPs are 100% physically backed. This means that for every 1x ETP an investor holds, we physically hold the stock backing it. This ensures that the product the investor owns has “longevity” and the inherent credit risk present in every similar competing product is negated.

In Conclusion

Trackers will be a very useful addition to an investor’s portfolio: its low cost promotes diversification; its range of currency options enables the factoring in currency play (if the investor chooses) and its European listing enables strong tax benefits as well. We encourage you to consider their viability in your investment strategy: please click here for a complete list of trackers we have on offer and subscribe to our mailing list to keep abreast of exciting new products and announcements.

Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.

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Violeta Todorova

Senior Research

Violeta se unió a Leverage Shares en septiembre de 2022. Ella gestiona la realización de análisis técnicos, investigación macroeconómica y de acciones, y ofrece información valiosa que ayuda a la definición de estrategias de inversión para los clientes.

Antes de unirse a LS, Violeta trabajó en varias empresas de inversión de alto perfil en Australia, como Tollhurst y Morgans Financial, donde pasó los últimos 12 años de su carrera.

Violeta es una técnica de mercado certificada de la Asociación Australiana de Analistas Técnicos y tiene un Diploma de Postgrado en Finanzas e Inversiones Aplicadas de Kaplan Professional (FINSIA), Australia, donde fue profesora durante varios años.

Julian Manoilov

Marketing Lead
Julián se unió a Leverage Shares en 2018 como parte de la principal expansión de la compañía en Europa del Este. Él es responsable de diseñar estrategias de marketing y promover el conocimiento de la marca.

Oktay Kavrak

Head of Communications and Strategy

Oktay se incorporó en Laverage Shares a fines de 2019. Él es responsable de impulsar el crecimiento del negocio al mantener relaciones clave y desarrollar la actividad de ventas en los mercados de habla inglesa.

Él vino de UniCredit, donde fue gerente de relaciones corporativas para empresas multinacionales. Su experiencia previa es en finanzas corporativas y administración de fondos en empresas como IBM Bulgaria y DeGiro / FundShare.

Oktay tiene una licenciatura en Finanzas y Contabilidad y un certificado de posgrado en formación empresarial de Babson College. También es titular de una certificado CFA (Chartered Financial Analyst).

Sandeep Rao

Investigación

Sandeep se unió a Leverage Shares en septiembre de 2020. Está a cargo de la investigación de líneas de productos existentes y nuevas, clases de activos y estrategias, con un enfoque particular en el análisis de eventos y desarrollos recientes.

Sandeep tiene una larga experiencia en los mercados financieros. Comenzó en un hedge fund con sede en Chicago como ingeniero financiero, su carrera abarcó varios dominios y organizaciones durante un período de 8 años, desde la División de Prime Services de Barclays Capital hasta (más recientemente) el Equipo Index Research de Nasdaq.

Sandeep tiene una maestría en Finanzas, así como un MBA del Illinois Institute of Technology de Chicago.

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