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Opening Remarks

00:00 Sylvia, this is a passively managed fund. Observing the holdings, as Katie noted, there is a significant presence of electric and construction companies, alongside chip makers like Nvidia and Broadcom. Why do chip makers have a lower allocation of 14% compared to machinery companies at 22%? The underlying thesis for this ETF is that it aligns with future trends. For anyone concerned about market saturation, this is the area to focus on. A considerable investment is required for data centers, which McKinsey estimates will need $6.7 trillion in capital expenditures, with $5.1 trillion earmarked for AI, primarily in renewable energy and electrical infrastructure. Chips are essential for running data centers, so we included them to offer a focused investment in air and power infrastructure. Interestingly, real estate investment trusts (REITs) hold only about 2%, which is less than what many expect when seeking exposure to data centers.
While REITs are a minor component, the major holdings, like Quanta Services and Governo, are pivotal in powering data centers and fostering AI innovation. The connectivity aspect is covered by a smaller portion of the ETF, appealing to investors interested in that sector.
Now, regarding leveraged single-stock ETFs, Defiance is a significant player here. There have been numerous filings for 5x and 3x leveraged products, but these types of offerings are not yet available in the U.S. due to regulatory constraints. With the government currently shut down, do you think issuers are just submitting filings without expecting immediate responses? Many issuers have filed for various products, including single-name leveraged ETFs. We have about 75 days for decisions on these filings, and we hope to receive feedback from the SEC soon. No products have launched without SEC approval, to my knowledge.
Kevin Hassett mentioned on CNBC that the shutdown might conclude this week, but 75 days is a long wait. Reflecting on the experience of the granted shares product in Europe, which had to liquidate due to excessive volatility, how does Defiance approach the potential risks associated with new product filings? Issuers of leveraged products must always be aware of risks, especially regarding outsized intraday moves. If a 20% move occurs in a 5x fund, it could wipe out the entire investment. We have strategies in place to manage such risks. The term «target» in our filings indicates that actions may be necessary to protect investors and prevent total fund loss during significant market movements.
Most of our competitors also adopt similar risk management strategies. The current popularity of leveraged single-stock ETFs seems to attract retail investors eager for these high-risk products. However, if retail interest wanes, would institutional investors step in? While retail trading is significant, institutional trading remains robust, involving high-frequency traders and hedge funds. Retail investors vary widely, with many sophisticated day traders familiar with leverage and its associated risks. We aim to ensure that our messaging about these products is clear and accessible to all investors.

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Firms Need to Manage ‘Outsized Moves’ in Leveraged ETFs: Defiance CEO

October 20th, 2025, 8:18 PM GMT+0000

Sylvia Jablonski, CEO & CIO of Defiance ETFs, appears on «Bloomberg ETF IQ» to discuss the Defiance AI & Power Infrastructure ETF (ticker: AIPO) and the rising trend in leveraged funds. The recent surge in ultra-leveraged products has sparked discussions about their potential risks and rewards. Asset managers argue they are simply responding to investor demand, with nearly one-third of all ETFs launched this year incorporating some level of leverage. (Source: Bloomberg)

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