Can you follow Buffett through leveraged ETFs? Korean securities firm "boldly" proposes a packaged Berkshire (BRK.B.US) plan

One of South Korea's largest retail brokerages is currently planning to package Berkshire Hathaway's Class B shares (BRK.B.US) into an exchange traded fund (ETF) magnified by derivatives, but this may not be a move favored by Buffett. A regulatory filing shows that Kiwoom Securities Co. has partnered with Tidal Investments, based in Milwaukee, to establish an ETF that aims to provide 2x daily returns on Berkshire's performance. Nearly 30 years ago, Warren Buffett founded Berkshire Hathaway's Class B shares to prevent fund managers from splitting the shares of this high-priced conglomerate. Single-stock ETFs like this have swept through the fund industry, leveraging the potential returns and losses of companies like NVIDIA Corporation (NVDA.US) and Tesla, Inc. (TSLA.US). In South Korea, securities firms like Toss Securities and Mirae Asset Securities Co. have been seeking to profit from the growing demand for US stocks amidst the lackluster performance of the South Korean stock market. Gavin Filmore, Tidal's Chief Revenue Officer, said in an interview, "Traditionally, in leveraged ETFs, most of the interest and asset flow are concentrated in ETFs with high volatility. Berkshire is almost the complete opposite." Leveraged ETFs are typically designed for active traders who want to bet on a stock's performance not exceeding a day, as these funds often deviate from the trajectory when tracking a stock over a longer period. But Buffett may not be too fond of using derivatives to enhance Berkshire's returns, as he has referred to them as "financial weapons of mass destruction." While Buffett's company has a good reputation, it remains to be seen whether short-term traders will be interested in using this leverage strategy to handle such a stable stock. Buffett is known as the ultimate long-term investor, always advising people to hold onto stocks they can have confidence in for many years. 94-year-old Buffett and his company already have a following in South Korea. According to data from the Korea Securities Depository, as of November 8, South Korean individual investors hold Berkshire's Class A and B stocks worth over $800 million. Matthew Palazola, an insurance industry analyst at Bloomberg Intelligence, said that the Asian market "likes Berkshire." A representative from Kiwoom declined to comment. Representatives from Berkshire did not respond to requests for comment. South Korean retail investors have already embraced some large leveraged ETFs listed in the US. Data from depositories shows that so far this year, the single-stock ETF for Tesla, Inc. -The Direxion Daily TSLA Bull 2X Shares- has received $225 million in investments from South Korean retail investors, with total holdings of $1.2 billion as of November 8. Kick BRK 2X Long Daily Target will be Berkshire's first single-stock ETF in the US, with several other ETFs trading overseas. However, these ETFs have not gained many followers: Leverage Shares 2x Long Berkshire Hathaway ETP trades on several European exchanges, but has only garnered around $2.3 million in assets. Kiwoom's new ETF will purchase Berkshire's Class B shares, then issue its own stock to investors, with the price likely lower than the closing price of $467.36 per Class B share on Monday. In order to increase exposure to Berkshire's daily gains, this ETF will enter into swap agreements with brokers and trade options on Berkshire's B shares. The Berkshire Hathaway ETF will be a product of Kiwoom, operated behind the scenes by Tidal, in exchange for a portion of management fees. Tainted Reputation Wall Street's creation of early single-stock funds for Berkshire shares prompted Buffett to create the company's Class B shares nearly 30 years ago. At the time, Berkshire's Class A shares traded at over $30,000 per share, while ETFs were in their early stages. In 1995, Philadelphia political figure Sam Katz submitted documents to create a unit investment trust, similar to a fund, which could pre-purchase a fixed portfolio of stocks and bonds and hold these securities for a period of time. He wrote that the trust would provide "convenient and affordable access to Berkshire Hathaway common stock without needing to own all the shares." In an interview, Katz said that Silvercorp Metals Inc. threatened to split the stock, establish their own trust, or create a second class of stock to bankrupt the trust. Buffett fulfilled the latter threat by issuing B shares equivalent to 1/30 of A shares. Investors flocked to this new stock, rendering Katz's trust obsolete. In a letter to shareholders in 1996, Buffett warned that such trusts were "expensive" tools, with brokers aggressively selling them to "immature buyers" to earn high commissions. This would burden Berkshire with "tens of thousands of dissatisfied indirect owners (trust holders) and damaged reputations." Katz said he has no regrets: "How many people get the chance to square off against Warren Buffett?"