Can leveraged ETFs continue to excite investors?

Two firms are breaking new ground in the leveraged ETF space this week with launches targeting both the structured credit and single-stock markets – areas gaining more and more attention from retail traders.

Reckoner Capital Management, a New York-based asset manager specializing in alternative credit, debuted the first leveraged AAA collateralized loan obligation ETF. The fund, called the Reckoner Leveraged AAA CLO ETF and trading under the ticker RAAA, aims to provide higher yields by using leverage on a portfolio of top-rated CLO bonds.

“While the CLO ETF market has grown significantly... there is still limited differentiation among AAA CLO ETFs,” John Kim, Reckoner’s co-founder and CEO, said in a Wednesday statement announcing the launch. “What is unique about RAAA is that we draw upon our longstanding industry relationships to select attractive, senior AAA CLO bonds... and utilize reverse repurchase agreements to create a modest amount of leverage.”

RAAA uses up to 50 percent leverage and will be actively managed. According to Reckoner, the fund will target floating-rate, AAA-rated CLO tranches—securities that sit atop the CLO capital structure and are generally considered lower-risk due to their senior status and credit protection.

The strategy involves dynamically adjusting exposure, increasing leverage during periods of economic stability and trimming it when volatility rises. “We are excited to bring a new and innovative AAA CLO product to the market and pleased to make RAAA broadly accessible to individual investors,” Kim added.

In an interview with Bloomberg, Kim said the firm expects the leverage feature to help the fund buy CLO bonds opportunistically without needing to sell existing holdings. He noted that while RAAA is targeted to retail investors, professional investors in CLOs sometimes borrow eight or nine times their capital to boost returns.

“There’s relatively little risk of default in CLOs and banks are quite willing to provide financing against them,” Kim told Bloomberg.

While Reckoner’s focus is on structured credit, ETF issuer Tradr is doubling down on speculative equities. The firm announced the launch of five new industry-first 2x leveraged single-stock ETFs, each tracking names with high volatility or thematic appeal: CoreWeave, AST SpaceMobile, Constellation Energy, GE Vernova, and NuScale Power.

The funds, set to begin trading July 11, are part of Tradr’s growing suite of products aimed at traders seeking short-term directional exposure.

“These five new ETFs are tied to some of the most exciting narratives in the market today,” Matt Markiewicz, Tradr’s head of product and capital markets, said Wednesday. He cited investor interest in artificial intelligence infrastructure and clean energy as key drivers.

According to Barron’s, over 30 leveraged ETFs were launched in the second quarter of 2025 alone, many of them focused on individual stocks. While some of these funds have delivered massive short-term returns – such as the GraniteShares 2x Long COIN ETF, which surged 233 percent during the quarter – others have demonstrated the compounding risks. The Direxion Daily TSLA Bull 2X Shares ETF, for example, fell more than 56 percent over the first half of 2025, while Tesla stock declined just over 21 percent.

Critics have warned that these funds promote a “double-or-nothing” mentality and are best avoided by long-term investors, given the outsized risks of losses that come with the strategies.

Nonetheless, retail demand continues to drive product expansion and product flows, with Bloomberg reporting billions pouring into the top leveraged equity strategies from retail investors after President Donald Trump's bombshell tariff announcement in early April.

For investors, the emergence of more complex leveraged fixed income strategies – like RAAA – may raise new questions about portfolio fit and risk tolerance. At the same time, the proliferation of leveraged single-stock ETFs is testing how far retail investors will go to chase short-term gains.