GEAR – rising to the challenge.

Hi Alain,

GEAR is the BetaShares Geared Australian Equity ETF (ASX: GEAR) that provides approximately 2.2.86x leveraged exposure to the ASX 200. It is designed for “short-term tactical use” by investors, as the daily rebalancing of leverage means returns over longer periods can deviate significantly from a simple 2x multiple of the underlying market.

• Over the last 10-years (to 30 June 2026) the GEAR ETF has advanced +13.43% per annum, versus the unleveraged ASX200 at 9.45% pa.
• For comparison, the (ungeared) Market Matters Active Growth Portfolio has returned 12.47% per annum over the same time frame.
• On a risk adjusted basis, the volatility and drawdown in the GEAR has been materially higher. During COVID, GEAR experienced a ~60% drawdown – if you were forced to sell at an inopportune time, the impact is significant.
• The issue with GEAR is the fund is forced to sell in a falling market to maintain gearing targets, but it is also forced to buy in a rising market for the same reason. That’s why you don’t get straight 2x market returns as you might expect.
• To further highlight this, if we pick a period with a large drawn within it, such as COVID, the impact of this is more pronounced. Using 1/7/2017 to 30/06/22 (i.e. 5 years with a big drawn down within it), GEAR returned 6.5% pa versus the (ungeared) ASX 200 over that time frame of 6.8% pa. The Market Matters Active Growth Portfolio returned 9.9% pa.
• The better product to use if thinking longer term (and geared ETFs) in our opinion is the G200 by Betashares, with 30-40% leverage. It was launched to reduce the impact of the embedded issue in GEAR, and designed as a longer term hold with less forced rebalancing.

Of course, the other aspect worth mentioning is that different strategies suit different investors. We love researching companies and picking stocks, but it’s not for everyone. There are many people out there who will resonate with your view, and clearly the growth in ETFs is showing that to be true. For us, we prefer to pick stocks and aggregate them within a portfolio to meet a specific objective. We all have to pick our own path, and have conviction in that path, so we stay the course through the inevitable ups and downs. When using gearing, the ups and downs are bigger.

A bit more insight into the issue of rebalancing for those interested – it’s important and often underappreciated for those using products like this;

Because GEAR resets its leverage to 2-2.86x net asset value at the end of each trading day, returns compound on a changing base. In volatile, sideways markets this creates volatility decay (or beta slippage), where the ETF can lose value even if the underlying index finishes broadly unchanged. For example, if the ASX 200 falls 10% then rises 10%, the index is down around 1%, but GEAR would lose roughly 4% as gains are earned on a smaller base after the initial fall. Over time, this drag means GEAR is unlikely to deliver a simple 2x multiple of the index’s return, making it better suited to short-term trading than long-term buy-and-hold investing.

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ASX200 v BetaShares Geared ETF (GEAR)

LAST UPDATED 09/07/2026 12:43

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chart

ASX200 v BetaShares Geared ETF (GEAR)

LAST UPDATED 09/07/2026 12:43