Geared ETFs in Australia: how leveraged ETFs work, and what they really cost
Written by an ex-institutional trader. What a geared ETF is, how GEAR and GGUS differ from the daily-reset leveraged ETFs Americans trade, the gearing ratios and fees of every ASX-listed geared fund, a worked example of what a 20 percent market fall does to one, and the alternatives.
Direct answer
A geared ETF is a fund that borrows money to buy more of its underlying market than investors' capital alone would allow, so gains and losses are magnified. The best-known Australian examples are Betashares GEAR (Australian shares) and GGUS (US shares, currency hedged), which keep their gearing ratio between 50 and 65 percent. That works out to roughly 2 to 2.9 times market exposure. If the market falls 10 percent, expect a fall of 20 percent or more. The ASX now labels these products "complex ETFs".
The borrowing happens inside the fund, so there are no margin calls and you cannot lose more than you invest. The trade-offs are interest costs, management fees charged on gross assets (GEAR's 0.78 percent is closer to 1.6 to 2.2 percent of your money), and path dependency: after a fall the fund must sell assets to stay inside its gearing band, which locks in losses. A newer group of moderately geared funds (GHHF, G200, GNDQ, at 30 to 40 percent gearing) is built for longer holding. For short-term leveraged positions, long or short, traders more often use index or ETF CFDs.
What a geared ETF is
An ordinary ETF invests the money its unitholders put in. A geared ETF invests that money plus a loan. If investors contribute AUD 100 million and the fund borrows another AUD 120 million, it holds AUD 220 million of shares. Unitholders own the whole portfolio, less the debt.
Australians use "geared" where Americans say "leveraged", and the ASX has recently started labelling all of these products complex ETFs, which is why fund names now read "Betashares Geared Australian Equities Complex ETF". The label is a warning. These are the only mainstream ASX-listed funds where a bad year for the market can mean losing half your money or more.
The appeal is just as plain. You get leveraged exposure in a normal share-trading account, a super wrap, or an SMSF, with no loan application and no margin calls, and the fund borrows at institutional interest rates that a retail margin borrower cannot access.
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Geared ETFs on the ASX
Figures below are from issuer product pages and the ASX Investment Products report for August 2026.
| Ticker | Issuer | Market | Gearing (LVR) | Exposure | Fee (on gross assets) |
|---|---|---|---|---|---|
| GEAR | Betashares | S&P/ASX 200 | 50% to 65% | About 2.0x to 2.9x | 0.78% |
| GGUS | Betashares | S&P 500, AUD hedged | 50% to 65% | About 2.0x to 2.9x | 0.80% |
| LNAS | Global X | Nasdaq 100, AUD hedged (futures) | n/a | 2.0x to 2.75x | 1.00% |
| G200 | Betashares | Australian shares (via A200) | 30% to 40% | About 1.4x to 1.7x | 0.35% |
| GNDQ | Betashares | Nasdaq 100 (via NDQ) | 30% to 40% | About 1.4x to 1.7x | 0.50% |
| GHHF | Betashares | Diversified all-growth portfolio | 30% to 40% | About 1.4x to 1.7x | 0.35% |
| GMVW | VanEck | Australian equal weight (via MVW) | See PDS | See PDS | 0.35% indirect cost |
LVR is the loan-to-value ratio: borrowings divided by total assets. Exposure is total assets divided by net assets, which equals 1 divided by (1 minus LVR). Other geared products exist, including an actively managed geared Australian share fund (LEVR) and geared bond funds (GGAB, GGFD). Fees and ranges change; check the issuer's page.
Two families are visible in that table. The high-gearing funds (GEAR, GGUS, LNAS) are the ones Betashares rates "very high risk" and says investors should monitor "as frequently as daily". The moderate-gearing Wealth Builder funds launched in 2024 borrow much less and are pitched at investors with long horizons who would otherwise consider a margin loan.
The gearing maths, worked
Take a fund that starts with AUD 220 of shares, AUD 120 of debt, and therefore AUD 100 of net assets. Its LVR is 54.5 percent and its exposure is 2.2 times.
| Step | Assets | Debt | Net assets | LVR |
|---|---|---|---|---|
| Start | 220 | 120 | 100 | 54.5% |
| Market falls 20% | 176 | 120 | 56 | 68.2% |
| Fund sells 16 to return to 65% | 160 | 104 | 56 | 65.0% |
| Market rises 25% (index back to start) | 200 | 104 | 96 | 52.0% |
Three things happened. A 20 percent fall in the market became a 44 percent fall in the fund. The fall pushed the LVR above the 65 percent ceiling, so the fund had to sell shares near the low to repay debt. And when the index fully recovered, the fund did not quite: it finished at 96, before interest and fees. In this instance the forced sale cost little because the rebound was sharp and the fund was still heavily geared on the way up. Stretch the same round trip over a year of chop, with two or three forced rebalances and 12 months of interest, and the gap widens quickly.
This is what "path dependent" means. A geared fund's return over a year is not simply the index return multiplied by two. It depends on the route the index took.
The real fee
GEAR's management fee is 0.78 percent a year. That sounds comparable to an active fund. But it is charged on gross assets, the geared-up portfolio, not on your net investment. At 2.0 times exposure, 0.78 percent of gross assets is 1.56 percent of net assets. At 2.86 times, it is 2.23 percent. VanEck makes the same point on its GMVW page: a 0.35 percent cost on gross assets equals 0.70 percent of net assets at 50 percent gearing.
Then there is interest. The fund's borrowing cost is not part of the management fee. It comes out of the portfolio's income, which is why highly geared funds often pay small or irregular distributions despite holding plenty of dividend-paying shares. With institutional borrowing rates of, say, 5 percent and AUD 1.20 borrowed for every dollar of net assets, interest alone is a drag of about 6 percent a year on your capital. The underlying shares need to return more than the borrowing rate for the gearing to help at all.
None of this is hidden. It is in each PDS. It is just rarely in the one-line summaries.
Internally geared vs daily reset
Most of what is written online about leveraged ETFs describes the American products: funds like TQQQ and SOXL that promise three times the index's daily return and rebalance every afternoon to deliver it. Their long-run behaviour is dominated by daily compounding. If an index falls 10 percent on Monday and rises 11.1 percent on Tuesday, it is flat. A 3x daily fund falls 30 percent, then rises 33.3 percent, and ends 6.7 percent down.
The Betashares geared funds work differently. They do not target a daily multiple. They let exposure drift inside a band and rebalance only when the LVR leaves it. That reduces the day-to-day compounding drag, but as the worked example shows, it does not remove path dependency. Global X's LNAS sits closer to the American model: it uses Nasdaq 100 futures to hold exposure between 2 and 2.75 times.
There are no 3x ETFs on the ASX. Australians who trade TQQQ or SOXL do so through a broker with US market access, and they take on currency risk and the US estate-tax and W-8BEN paperwork that comes with US-domiciled funds.
The risks
- Magnified drawdowns. The ASX 200 fell about 37 percent peak to trough in early 2020. Run that through the arithmetic above and a fund geared at 2.2 times is facing a loss of well over 60 percent.
- Forced selling at the wrong time. The LVR ceiling makes the fund a seller after falls and a buyer after rises.
- Interest rate exposure. When rates rise, the fund's borrowing cost rises with them, and it rises on the full loan.
- Sideways markets. A geared fund can lose money in a year when the index goes nowhere, because interest and fees are paid regardless.
- Behavioural risk. Very few people hold through a 60 percent drawdown. Selling at the bottom turns a temporary loss into a permanent one, and leverage makes the urge much stronger.
I would put it this way. Gearing does not give you a better investment. It gives you more of the same investment, with a financing bill attached. If the underlying market does well over your holding period and you can sit through the falls, gearing helps. Otherwise it hurts, and it hurts more than the headline multiple suggests.
Geared ETF vs CFD vs margin loan
| Feature | Geared ETF | Index or ETF CFD | Margin loan |
|---|---|---|---|
| Typical leverage | 1.4x to 2.9x | Up to 20:1 (major index) or 5:1 (ETF) | Up to about 3x on approved securities |
| Margin calls | None for the investor | Yes; close-out at 50% of margin | Yes |
| Lose more than invested? | No | No (ASIC negative balance protection) | Yes, possible |
| Go short | No (separate inverse funds) | Yes | No |
| Financing cost | Institutional rates, inside fund | Benchmark plus about 2.5% | Retail margin rates |
| Holds in super or SMSF | Yes | Generally no | Restricted |
| Typical tax for individuals | CGT, discount after 12 months | Ordinary income | CGT; interest may be deductible |
| Sensible holding period | Months to years | Hours to weeks | Years |
The columns are not rivals so much as tools for different jobs. Someone who wants a leveraged long position in Australian shares for five years, inside an SMSF, is looking at the first column. Someone who thinks the Nasdaq is due a bounce this week, or a fall, is looking at the second: a CFD lets you choose your own leverage up to the ASIC cap, go short as easily as long, and pay financing only for the nights you hold. It will also close you out if the trade goes against you and margin runs short, and most retail CFD accounts lose money. ETF trading in Australia covers that route, and inverse ETFs covers the listed funds built to profit from falls.
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Open AvaTrade accountSources and primary references
- Betashares GEAR and GGUS product pages - gearing ranges, fees on gross assets, and risk warnings.
- Betashares Wealth Builder range - G200, GNDQ, and GHHF moderate-gearing funds.
- Global X LNAS and VanEck GMVW product pages.
- ASX Investor Update: pros and cons of geared ETFs.
- ASIC CFD product intervention order - retail leverage caps, margin close-out, and negative balance protection.
The worked example is illustrative and ignores interest, fees, and distributions. The interest-rate figure is an assumption for illustration. Last reviewed: 2026-09-19.
Frequently asked questions
What is a geared ETF?
A geared ETF is an exchange traded fund that combines investors' money with borrowed money and invests the total in a market such as the ASX 200 or the S&P 500. Because the fund holds more assets than its investors contributed, percentage gains and losses on your units are larger than the market's. In Australia most geared ETFs are internally geared, meaning the fund itself takes out the loan, so investors face no margin calls.
What is the difference between GEAR and GGUS?
Both are Betashares funds with a gearing ratio managed between 50 and 65 percent, giving about 2 to 2.9 times exposure. GEAR invests in the largest 200 Australian shares. GGUS invests in the US S&P 500 and hedges the currency back to Australian dollars, so the AUD/USD rate does not affect returns. GEAR charges 0.78 percent a year and GGUS 0.80 percent, in both cases calculated on gross assets rather than on your net investment.
Can you lose more than you invest in a geared ETF?
No. The loan belongs to the fund, not to you, and unitholders have no liability beyond the value of their units. The worst case is that your units fall to a very small fraction of what you paid. That is different from a margin loan or a futures position, where losses can exceed your deposit, and similar to a retail CFD account in Australia, where ASIC requires negative balance protection.
Is it a good idea to hold a geared ETF long term?
It depends on the fund and on your tolerance for very large drawdowns. Highly geared funds like GEAR and GGUS can more than double a market's fall and then need an even larger rise to recover, and they forcibly sell assets after big declines. The issuer describes them as very high risk and recommends active monitoring. Moderately geared funds with 30 to 40 percent gearing, such as GHHF and G200, are designed with longer holding periods in mind, though they still magnify losses. This is general information, not a recommendation.
What is the downside of leveraged ETFs?
There are four. Losses are magnified along with gains. The fund pays interest on its borrowing, which drags on returns every year whether the market rises or not. Fees are charged on the gross (geared) asset value, so the effective fee on your money is roughly double the headline figure. And returns are path dependent: in a volatile, sideways market a leveraged fund can lose money even if the index ends where it started.
Why are 3x leveraged ETFs riskier than they look?
A 3x fund resets its leverage every day. A 33.4 percent fall in the index in a single day would wipe it out completely, and long before that, daily compounding in a choppy market erodes value. If an index falls 10 percent one day and rises 11.1 percent the next, it is back where it began, but a 3x daily fund is down 6.7 percent. There are no 3x ETFs listed in Australia; the highest-exposure ASX products target up to about 2.75 times.
What is the best geared ETF on the ASX?
There is no single best one and this site does not give personal advice. The choice is mostly about which market you want and how much gearing you can live with. GEAR and GGUS provide high gearing to Australian and US shares. G200, GNDQ, and GHHF provide moderate gearing to Australian shares, the Nasdaq 100, and a diversified all-growth portfolio. LNAS offers 2 to 2.75 times Nasdaq 100 exposure through futures. Compare the gearing range, the fee on gross assets, fund size, and spread.
Are geared ETFs better than CFDs for leverage?
They do different jobs. A geared ETF suits someone who wants leveraged long exposure for months or years in an ordinary share account or SMSF, with no margin calls. A CFD suits short-term positions of hours to weeks, allows short selling, and offers up to 20:1 on major index CFDs or 5:1 on ETF CFDs for retail clients, but charges overnight financing at a benchmark rate plus a markup of around 2.5 percent and will close your position if margin runs short.
