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Buffett’s Berkshire Is Being Packaged Into a Leveraged ETF

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(Bloomberg) — Warren Buffett created Class B shares of Berkshire Hathaway nearly 30 years ago to thwart money managers who sought to split the group’s pricey shares.

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One of South Korea’s largest retail brokerages now plans to consolidate Class B shares into an exchange-traded fund stocked with derivatives, another move Buffett may not like.

Kiwoom Securities has teamed up with Milwaukee-based Tidal Investments to form an ETF designed to provide 200% of Berkshire’s daily performance, according to a regulatory filing.

Single-stock ETFs like these have been sweeping the fund world, using leverage that increases the potential returns — and losses — of big companies like Nvidia Corp. And Tesla Inc. In South Korea, brokerage firms such as Toss Securities and Mirae. Asset Securities seeks to benefit from the growing demand for US stocks amid the sluggish performance of local stocks.

“Traditionally in leveraged ETFs, the lion’s share of interest and asset flow has been in the more volatile names,” Gavin Fillmore, chief revenue officer at Tidal, said in an interview. “Berkshire is almost the polar opposite.”

Leveraged ETFs are often intended for active traders who want to bet on a stock’s performance for no more than a day, as these funds typically go awry when tracking stocks over a longer period. Using derivatives to exploit Berkshire’s returns may not sit well with Buffett, who once described them as “financial weapons of mass destruction.”

While Buffett’s company is a well-known name, it remains to be seen whether day traders will have an appetite for riding consistent stocks like this one with this type of leverage strategy. Buffett is known as a long-term investor who advises people to own stocks that they will be comfortable holding for years.

Buffett, 94, and his company already have a following in South Korea. As of Nov. 8, individual investors in South Korea owned more than $800 million worth of Berkshire Class A and Class B shares, according to data compiled by the Korea Securities Depository.

Asian markets “have a bias for Berkshire,” said Matthew Palazola, an insurance analyst at Bloomberg Intelligence.

A representative for Kiwoom declined to comment. Representatives for Berkshire did not respond to a message seeking comment.

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