Warren Buffett is getting the leveraged ETF treatment in the latest fund to offer increased exposure to the Oracle of Omaha’s investments.
What Happened: Tidal Investments and Kiwoom Securities Co. jointly launched a new leveraged ETF based on the Class B shares of Berkshire Hathaway Inc BRKBRK.
The new ETF from Kiwoom, one of the largest retail brokerages in South Korea, will use swaps and derivatives to meet its goal of providing two times the daily returns of Berkshire Hathaway stock, as reported by Bloomberg.
The new ETF is called The Kick BRK 2X Long Daily Target ETF. It’s set to trade under the ticker BRKX on the New York Stock Exchange.
The move comes as companies aggressively launch inverse and leveraged ETFs to offer increased exposure to certain individual stocks and sectors.
Popular stocks like Nvidia, Tesla and MicroStrategy have been the subject of multiple leveraged and inverse ETFs, but Berkshire Hathaway may not jump out as a stock that sees as much volatility and high-volume trading in a given day.
"Traditionally on the leveraged ETFs, the lion's share of the interest and asset flow has been on the more volatile names. Berkshire is almost the polar opposite," Tidal chief revenue officer Gavin Filmore said, as reported by Bloomberg.
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Why It's Important: Buffett has not been a fan of using derivatives, referring to them as "financial weapons of mass destruction."
As a long-term investor, Buffett often bets on blue-chip and value stocks over the long course. The result has been slow and steady returns for Berkshire Hathaway over the years.
The big question will be if investors want to take increased risk with a leveraged Berkshire Hathaway ETF that might not produce the same return opportunities as other leveraged ETFs.
The fund could be hoping to capture the increased interest in Buffett and Berkshire Hathaway by investors in South Korea. Investors in the country own more than $800 million of Berkshire Hathaway share, according to data from the Korea Securities Depository, as reported by Bloomberg.
South Korean investors have also bought into leveraged ETFs with the Direxion Daily TSLA Bull 2X Shares TSLL attracting $225 million from investors in the region in 2024 according to the report.
Berkshire Hathaway Class B stock is up 28.9% year-to-date in 2024 and has gained 112.6% over the last five years.
A recent Benzinga poll found that readers are more likely to recognize the steady returns of the conglomerate led by Buffett in the future.
Buffett won a poll that asked the question, "In 100 years, who's going to be remembered as the most legendary investor?" Buffett received 61% of the vote, ranking ahead of Elon Musk, Jeff Bezos and Mark Cuban.
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