Odd Lots · Friday, July 10, 2026
While levered ETFs contribute to balance sheet scarcity and potentially tighter financing rates, Alex Altman argues this is not the sole reason. The primary drivers are the rise in markets, increased AUM in hedge funds, and general bank balance sheet tightness, with levered ETFs being one of many contributing factors.
“It's going to create a degree of tightness within bank balance sheets. That's not in isolation true. The fact of the matter is is that bank balance sheets have become tighter because my primary reason is markets have gone up, and as market's gone up, the price of stuff has gone up, and so that has been without a doubt, the biggest reason for financing rates rocketing is the fact that spot levels are higher.”
“This has been a contributing factor. But we shouldn't overlook the fact that if you just look at the biggest driver of AUM growth within the hedge fund community, it's the multi manager platform we're talking about. Those guys are effectively are trillion dollars of AUM. Now that's potentially tripled since COVID, and obviously those guys have deployed a huge amount of risk on a long and a short side. So again that's using balance sheet as well.”