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Bearish retreat on equities by S&L investors as crude oil slump triggers global growth uncertainty

Tuesday 16th December '14

  • S&L investors to cut their positions in equities, fixed income and commodities by $3 billion, as the slump in crude oil clouds the outlook on global growth. 
  • Outflows of $1.6 billion from Japanese equities, $451 million from US equities and $335 million from South Korean equities overwhelmed the S&L ETP flows in other asset classes, globally. 
  • S&L investors continue to build up contrarian bets on falling crude oil by selling shorts and buying long ETPs. $664 million inflows into long ETPs accompanied $809 million outflows from short ETPs tracking oil since July 2014.
  • At the end of November, the AUM of S&L ETPs globally stood at $58 billion. At the same time, BOOST reached a $155 million AUM, rising 320% from the end of November 2013.
BOOST ETP, A WisdomTree Company and Europe’s award winning, specialist short and leverage (S&L) exchange traded product (“ETP”) provider, is proud to announce the release of the BOOST Short & Leveraged ETFs/ETPs Global Flows Report for November 2014. The report reveals that $58 billion of AUM is held in S&L ETPs as at the end of November, a decrease of 5% from the end of October 2014 and effectively flat from the end of December 2013. 
Investors in S&L ETPs can express bullish as well as bearish sentiment by investing in either a leveraged or a short ETP. Thus the AUM of S&L ETPs can reveal a broader range of investor sentiment than flows or AUM data for mutual funds and other ETPs. Since S&L ETPs tend to be held for shorter periods and used more for tactical positioning, AUM and flows data for S&L ETPs can provide valuable insight into the market sentiment of a relatively sophisticated set of investors. The BOOST Short & Leveraged ETFs/ETPs Global Flows Report highlights the key flows and trends in S&L ETPs across asset classes and geographies.
Today S&L ETPs cover all major assets classes and geographies. In terms of asset allocation at the end of October, equity ETPs are the most popular with 69% of total AUM ($40.1 billion), followed by debt (16%, $9.3 billion) and commodities (6%, $3.6 billion). AUM in currency and alternative ETPs comprise $4.9 billion. In equities, most of the AUM is focused on the US ($16.3 billion, excluding US sector equities of $6 billion) and European equities ($5.8 billion). In Europe, broad European region indices (excluding sector focused ETPs) are the most popular ($2.3 billion in AUM), followed by Germany ($1.2 billion), Italy ($615 million) and France ($521 million). In debt, most of the AUM is in US government debt ($6.4 billion), German government debt ($1.1 billion) and Italian government debt ($239 million). In commodities, natural gas ($985 million of AUM), oil ($853 million of AUM), gold ($703 million of AUM) and silver ($685 million of AUM) are the most popular. 
Viktor Nossek, Director of Research for WisdomTree Europe commented: “Demand for S&L ETPs was also reflected in BOOST ETP’s AUM, which stood at $155 million at the end of November 2014. The introduction of BOOST’s range of 3x short and 3x leverage ETPs was a first in the UK in December 2012 and a first in Italy in October 2013, and it is proving to be a useful tool for investors to hedge risk or express a view with less capital.” 

“Last month saw S&L investors markedly cutting their exposure to major equity markets as the crash in oil leaves a big question mark on its net impact on global growth. As equity markets struggled to sustain momentum, investors overwhelmingly sold their long leveraged exposures to equities, choosing to sit on cash. While the absence of S&L investors’ conviction on US Treasuries also drove outflows from both long and short ETPs tracking US debt, the strong contrarian view in energy commodities was evident in the ongoing build-up of bullish positions in oil. When the dust settles on the direction of crude oil and its global macro implications for energy exporters and importers, S&L investors are likely to reposition back into equities and fixed income ETPs”.
Investors are increasingly using S&L ETPs for a variety of reasons. There is wider product availability, greater product knowledge from improved educational resources, and increased demand for hedging tools and leveraged instruments available. There is also a move towards independent, transparent and exchange traded instruments such as ETFs and ETPs. As a result of this increased usage and interest in S&L ETPs, BOOST recently launched a monthly Global Short & Leverage ETF / ETP Report and a Short & Leverage ETF / ETP Advisor Tool Kit.