Understanding Leverage

Considerations and Risks of Leverage

• Leverage can provide a diminishing benefit or negative return when short-term rates approach or exceed long-term rates.
• Leverage effectively creates a multiplier for a fund's NAV changes, whether the changes are positive or negative.
• Leverage increases a fund’s volatility or risk.
• Funds may employ hedging strategies to try to mitigate the risk of leverage.
• There is no guarantee that a fund's leverage strategy will be successful.