BlackRock CEO Larry Fink was wrong when he slammed leveraged exchange-traded funds, Luciano Siracusano, chief investment strategist at Wisdom Tree Investments, told CNBC Thursday. In fact, he believes they can be very useful when used properly.
"The structure is sound. They've been tested, just like fixed-income ETFs have been tested during stress, and they've held up very well," he said in an interview with "Closing Bell."
"They're actually a useful tool for short-term traders who are … careful about how they use them."
The key term is short-term, he emphasized, because the funds will decay over time if they are leveraged.
"Once you introduce leverage and you reset daily, the path of the direction of the returns impacts the long-term return. So it's not unusual for a lot of these ETFs to lose value cumulatively over time," he said.
On Wednesday, BlackRock's Larry Fink said leveraged ETFs "have a structural problem that could blow up the whole industry."
While most ETFs track indexes, leveraged ETFs look to deliver multiples of the performance of the index they track.