Of the two portfolio managers listed for the Ranger Bear Equity ETF in its Statement of Additional Information, only Del Vecchio has made a personal investment in the fund, and only at the level of $1,000 to $10,000, not a significant vote of confidence in the fund, according to mutual fund analysts who track managers' personal investments in the portfolios they run.
"No one who is bearish should invest in a shorting ETF," said Doty at Koss Olinger Financial Group. "Your losses can be theoretically infinite, because the market moves quickly and undermines returns.
"So the potential for being wrong is very dramatic," he added.
This applies more brutally to leveraged and inverse ETFs that seek 2x or 3x exposure to a long or short index, where losses can compound in a hurry due to the use of derivatives and short positions.
The managers of these riskier ETFs use a variety of strategies, including derivatives and shorting stocks, to meet their objectives. If underlying stocks or indexes go up, inverse ETFs will have to reduce their short exposure by maybe buying stocks at higher prices, which would lead to underperformance.