UBS AG's U.S. brokerage business has stopped selling exchange-traded funds that use leverage because the products do not conform to its emphasis on long-term investing.
The Zurich company's UBS Wealth Management Americas unit suspended sales of inverse and leveraged exchange-raded funds immediately, citing the "short-term nature of these securities," the New York brokerage unit said Monday.
ETFs typically mimic indexes and trade throughout the day like stocks. Leveraged ETFs use swaps or derivatives to amplify the daily returns of an index. Inverse ETFs move in the opposite direction of a benchmark.
The Financial Industry Regulatory Authority told brokers in June that leveraged ETFs might be unsuitable for individual investors who hold them for more than one day. Finra said this month that the funds can be appropriate when held longer than a day if they are "closely monitored by a financial professional."
The longer investors hold the leveraged ETFs, the further the actual returns can vary from the predicted returns, according to Scott Burns, the director of ETF analysis at Morningstar Inc., a Chicago firm that tracks the fund industry.
UBS Wealth Management Americas has 8,760 brokers, said Karina Byrne, a spokeswoman for the unit.