Yes. Because the strategy uses margin and short positions, losses are not capped the way they are in a long-only portfolio.
BKLN caps single-stock active positions, avoids expensive-to-borrow stocks, and runs low levels of active risk relative to the benchmark. These measures reduce, but do not eliminate, the risk of outsized losses. Higher leverage ratios increase both the potential for tax-loss generation and the potential for loss.
This strategy is appropriate only for investors who understand these mechanics and have the financial flexibility to absorb losses beyond their initial investment. Before investing, review Schwab’s margin disclosure statement and the Form ADV carefully.