Leveraged Fund Law and Legal Definition

Leveraged funds are mutual funds using aggressive investment techniques of financial leverage, such as buying on margin, short selling and option trading, to obtain maximum capital appreciation for investors in the fund. Leveraged funds use a variety of financial instruments from equity swaps to derivatives, such as futures contracts, to achieve their returns.

Leveraged funds try to achieve returns that are more sensitive, by a specific magnitude, to market movements than non-leveraged fund. The returns for leveraged funds usually vary between two times and three times the movement in a given index or market sector.