ETF BetaShares Bear Funds - BEAR / BBOZ / BBUS

Discussion in 'Shares & Funds' started by Simon Hampel, 29th Mar, 2020.

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  1. Simon Hampel

    Simon Hampel Founder Staff Member

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    I'm seeing a bit more discussion about the BetaShares Bear Funds here of late. I'm a bit concerned that people think these work the same way that other ETFs work - they don't and that could catch you out.

    Specifically, I am referring to the following three funds:
    You should start by reading the PDS for each of these funds and making sure you understand how they work. IF YOU DO NOT UNDERSTAND THE FUNDS, DO NOT INVEST IN THEM.

    BetaShares posted the following a few days ago to help people understand the funds. work: BetaShares Bear Funds – some questions answered

    One important factor to consider is the following:

    "each Fund aims for a specified gearing/portfolio exposure range on a day-to-day basis. However, it should not be expected that the return over a longer period will necessarily fall within the target range."​

    This is due to rebalancing of the portfolio exposure (gearing ratio) - as explained in the link above. Basically, don't expect the funds to track the market long term - they only track market movements on a daily basis. What this means is that having the market rise in value (ie fund drops in value) and then then market falls back to the same value - will not necessarily see the funds rise back to the same value as they were initially.

    When I get some time I will try and post some examples using actual data to demonstrate this.
     
    Simon Hampel, 29th Mar, 2020
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  2. funkychickendancer

    funkychickendancer Well-Known Member

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    BEAR tracks it the same as a normal etf but you are correct about the others. This is because of the gearing aspect of the fund.

    If a stock drops 25% you need to recover 33% to be back to the same amount of capital. All the small movements from the daily re-balance make this number more volatile.

    Good post - it is very relevant when trading super choppy markets like the last few weeks. Especially when people use the GEAR fund to try to pick the bottom on the long side. If it drops another 10-20% from entry they need much more to get back to break even, depending on the amount of time it has been held. Definitely something to consider.
     
    funkychickendancer, 29th Mar, 2020
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  3. mtat

    mtat Well-Known Member

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    Any sane person interested in actually growing their wealth long term should stay way from these products.

    The only winner here is Betashares by collecting their high management fee.
     
    mtat, 29th Mar, 2020
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  4. Simon Hampel

    Simon Hampel Founder Staff Member

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    These are not long term buy-and-hold investments. They are designed to be used tactically as insurance for your portfolio.
     
    Simon Hampel, 30th Mar, 2020
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  5. mtat

    mtat Well-Known Member

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    If one wants insurance they better diversify and hold bonds/cash.
     
    mtat, 30th Mar, 2020
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  6. Sticky

    Sticky Well-Known Member

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    Great post Simon.

    BEAR works the same way - it's just the the gearing ratio is lower (90% - 110%)
    There means there is still a drag so performance is not a direct 1:1 inverse.
    Easiest way to understand is you get 90% of the gain on the upside but 110% of the loss to the downside. Not quite that extreme in reality but gives you a general concept of how it works with the daily leverage reset.
     
    Sticky, 31st Mar, 2020
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  7. funkychickendancer

    funkychickendancer Well-Known Member

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    Interesting, I didn't know this.
     
    funkychickendancer, 1st Apr, 2020
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