DIY investors have been burnt after buying shares in a risky fund which borrows money to amplify returns from the natural gas price.
Customers of AJ Bell and Hargreaves Lansdown, Britain’s biggest brokers, have been selling shares in WisdomTree Natural Gas 3x Daily Leveraged after the exchange-traded fund fell 44pc from its high over the past week.
The fund was one of the top 10 most-sold exchange-traded funds among AJ Bell customers over the past week, after the soaring gas price sparked a wave of DIY investor buying.
Hargreaves Lansdown clients have also been fleeing the fund. The number offloading shares doubled in the first week of September and continued to rise last week.
Investors had been chasing profits from soaring gas prices, which had surged higher as the energy supply crisis worsened.
British natural gas prices skyrocketed above 400p per therm for the first time ever last week, up nearly 10 times on their level a year ago. They remain elevated at 221p per therm, though down heavily from their record high, after Russian president Vladimir Putin vowed to boost supplies to Europe.
Customers of Trading212, a broker popular with younger investors, are still betting on a continued climb, however. Over the past month the number of its customers owning the WisdomTree Natural Gas 3x Daily Leveraged fund has jumped 16pc.
Tom Bailey of Interactive Investor, another broker, warned that while leveraged funds could multiply gains, they could also deepen losses.
“There is always a huge risk when betting on the price of commodities,” he said. “Leveraged products exaggerate outcomes – so while the WisdomTree leveraged fund can triple natural gas price gains on an individual day, it does the same to losses. Often investors should not hold these types of funds for more than 24 hours.”