The rapid expansion of leveraged and inverse single-stock ETFs in the US is beginning to show signs of strain, as shrinking average fund sizes and a sharp rise in closures raise questions about how many products the market can sustain.
Investor appetite for leveraged exposure has grown alongside a volatile bull market, encouraging issuers to introduce products designed to multiply the daily performance of individual stocks. The trend became particularly visible in June, when such products represented as much as half of all new ETF launches.
The proliferation of funds, however, means more issuers are competing for a limited pool of speculative capital.
“The market for these is saturated and there’s only so much money out there chasing this kind of product,” said Morningstar analyst Daniel Sotiroff. “A few firms at the top end up commanding the lion’s share of the money, and then there’s a long tail of also-rans who are struggling to attract assets.”
Average leveraged ETF assets fall sharply
Industry observers generally view $50 million to $100 million in assets during a fund’s first one or two years as a rough threshold for establishing a sustainable ETF. Products that fail to reach that scale may struggle to generate enough revenue for their sponsors to cover costs.
Some funds have comfortably exceeded that level. The GraniteShares 2x Long NVDA Daily ETF has grown to approximately $3.9 billion, demonstrating the potential demand for leveraged exposure to heavily traded stocks.
Across the broader category, however, assets are substantially smaller.
Morningstar Direct figures show average assets in leveraged ETFs have fallen from $272.2 million at the end of 2024 to $63.3 million currently. Half of the funds have accumulated less than $7 million.
Second wave moves further into speculative stocks
The nature of new launches is also changing as issuers search for additional opportunities.
Vident president Amrita Nandakumar believes the industry is nearing the end of a second expansion wave, with newer offerings increasingly “scraping the bottom of the barrel” by targeting smaller, more speculative and less established stocks.
Despite those concerns, launches have continued at a record pace. Some 244 leveraged ETFs had debuted by mid-August, already exceeding the 229 introduced throughout 2025.
“The first wave we saw a few years ago, and it involved creating leveraged ETFs tied to the names that you’d expect, big, widely watched and volatile companies” such as Nvidia, Tesla and Alphabet, Nandakumar said.
The subsequent wave has expanded well beyond those established companies. New filings include leveraged products targeting smaller stocks, private companies that have yet to file for an IPO and even recently launched AI-themed ETFs.
“You don’t necessarily see these products being listed on the biggest or most stable companies any longer,” said Elisabeth Kashner, director of global funds research at FactSet.
Fund closures signal market consolidation
The expanding range of products has been accompanied by a significant increase in closures. Morningstar said 63 leveraged single-stock funds have shut down in the US so far in 2026, compared with only three last year.
Tradr ETFs has closed products linked to MongoDB and Datadog after both software companies were hit by selling pressure earlier in the year amid concerns about disruption from artificial intelligence.
“We are consistently evaluating our suite of funds to gauge investor demand,” said Matt Markiewicz, head of product and capital markets at Tradr.
GraniteShares also liquidated a 2x leveraged ETF tied to Lucid Group following a roughly 51% one-day collapse in the electric vehicle maker’s shares on July 14. Because a 2x product seeks to multiply the underlying stock’s daily move, a decline of that scale can effectively reduce its net asset value to zero.
“If a fund is below break even or shows no real signs of adoption by the market, we’ll close it,” GraniteShares CEO Will Rhind said, without commenting specifically on the Lucid-linked product.
Corgi Invest continues aggressive expansion
Not every issuer is pulling back. Silicon Valley-based Corgi Invest has launched 127 leveraged or inverse single-stock products this year and intends to expand its range further.
Founder Emily Yuan said the company does not intend to rapidly close funds simply because they are initially small.
Corgi’s products currently hold an average of around $1 million each, but Yuan expects lower fees to help the firm compete for investor assets.
“If you make good products, the money will come,” she said.
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