At the end of last week, the chair of the Financial Stability Board (FSB) Andrew Bailey sent a letter to the finance ministers of the G20 countries, as well as to central banks in which he warned the institutions about the rising popularity of leveraged ETFs. His concern is that increasing amounts of money invested in this kind of exchange-traded funds may amplify a possible market correction in the future.
Now, the real question is, is there really an increasing demand for leveraged ETFs or is Bailey just reacting to the number of headlines around these products? A view on the assets under management (AUM) in the global ETF industry shows that only $230.0 bn, or 1.04%, of the overall assets under management in the global ETF industry ($21.8 trn) were invested into leveraged ETFs. This means it looks like only a small portion of the overall AUM is invested in leveraged ETFs. That said, the market share of leveraged ETFs hovered around between 0.94% (March 31, 2026) and 1.32% (June 2026) of the overall assets under management over the course of the last three years.
Graph 1: Assets Under Management in the Global ETF Industry (in bn USD) by Product Type (August 31, 2024 – July 31, 2026)
Source: LSEG Lipper
Since the assets under management are only one side of the coin, it is worthwhile to have a look at the fund flows of leveraged exchange traded funds. Overall, leveraged ETFs enjoyed cumulative estimated net inflows of $15.3 bn globally over the course of first seven months of 2026. Even as this is a serious amount of money, these inflows represent only 0.85% of the $1,796.2 bn which were invested overall in ETFs globally.
Graph 2: Monthly Estimated Net Flows in Leveraged ETFs – January 1 – July 31, 2026 (in bn USD)
Source: LSEG Lipper
At a closer look, the monthly estimated net flows of leveraged ETFs do not show an unusual flow pattern over the course of the first seven months of 2026, as we witnessed months with significant inflows and outflows. That said, the overall level of the flows seems to be elevated, but this needs to be seen in context with the overall elevated level of inflows into ETFs globally, which is a sign that an increasing number of investors around the globe are using ETFs within their portfolios.
With regard to the above, it can be said that there is no significant increase in the usage of leveraged ETFs visible in the data. Nevertheless, the overall amount invested in leveraged ETFs can have a significant impact on financial markets, if investors are selling these products in large chunks. This may happen when markets fall sharply in the case of a major market event. Therefore, the warning by FSB chair Bailey is in general justified, even as market data does not show an increased demand for leveraged ETFs.
The views expressed are the views of the author, not necessarily those of LSEG.
This article is for information purposes only and does not constitute any investment advice.
