BOOST’s Short & Leveraged Flows Report Shows Record AUM as Investors Position for Rising Equities and Falling Bond Prices
Tuesday 21st January '14
- The AUM of short & leveraged (S&L) ETPs reached a record $55 billion at the end of 2013, up $10 billion (or 22%) from the preceding year, as investors globally continue to increase their usage of S&L ETPs
- Boost’s AUM reaches $50m having doubled in 8 weeks, with volumes rising by over 200%
- Increasing AUM in S&L equity ETPs shows investors in S&L ETPs are gearing up for a continued rise in equity markets at the start of 2014
- S&L investors have also been gearing up to gain from rising bond yields, with December inflows of $1.2 billion in S&L debt ETPs going almost exclusively into short bond ETPs
- Increasing risk appetite in 2013 drove investors to flee safe haven assets such as gold and silver
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 used more tactically, AUM and flows data for S&L ETPs can provide valuable timely 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.
Despite initial fears over the anticipated unwinding of monetary stimulus last summer, major equity benchmarks in the US, Europe and Japan attained new record levels towards the end of 2013. BOOST’s report reveals S&L investors are positioned to gain from a continued rise in equity markets. S&L investors have the most bullish position they have ever had on US equities, at $13.4 billion net long position, and for the first time in nearly six years a net long position on broad European indices, at $142 million net long.
Within Europe, sentiment is more mixed with investors in S&L equity ETPs starting 2014 with a net short position on Germany ($314 million) and the UK ($72 million), as well as a net long position on Italy ($366 million) and France ($136 million).
In contrast to equities, AUM in S&L bond ETPs at the start of 2014 is almost exclusively (98%) in short bond ETPs. Persistent worries of when, not if, the US Fed would begin unwinding monetary stimulus caused long dated US Treasury yields to rise by over 100 bps from its lows in June , undermining sentiment in government bonds. With the first USD 10bn taper announced by the Fed in December, S&L investors have been gearing up to gain from rising bond yields, with December flows of $1.2 billion going almost exclusively into short bond ETPs. At the start of 2014, investors’ positions in S&L ETPs are the most bearish they have been on US government debt since June 2011, and the most bearish ever on German and Italian government debt.
In commodities, as increasing risk appetite drove investors into the rising equity market, safe haven assets have suffered with precious metals prices tanking. S&L investors have been selling leveraged Exchange Traded Commodities (ETCs) in favour of short ETCs. Over 2013 investors sold off $230 million worth of leveraged positions and bought $136 million worth of short positions using S&L ETCs, equating to $366 million net short flows. At the end of 2013 S&L investors had a $6 million net short position in gold for the first time since S&L gold ETCs became available in February 2008.
These statistics demonstrate the value S&L ETPs can bring to investors. Investors have clearly been responding to the availability of new products as evidenced by the increasing AUM and trading in these products globally and specifically in BOOST’s products. BOOST’s S&L ETPs and ETCs, which are listed on the London Stock Exchange and Borsa Italiana, are attractive to investors as they provide a range of exposures from 2x to 3x or from -1x to -3x through one simple trade. These levels of exposure allow investors to make effective use of their capital to gain from rising as well as falling markets or hedge their positions.
Today, S&L ETPs cover all major assets classes and geographies. In terms of asset allocation at the end of 2013, equity ETPs are the most popular with 68% of total AUM ($36.8 billion), followed by debt (21%, $11.2 billion) and commodities (7%, $3.7 billion). In equities, most of the AUM is focused on US large cap and small cap equities ($17.6 billion), followed by European equities ($4.5 billion). In Europe, Germany large cap equities are the most popular ($1.3 billion of AUM), followed by Europe ($810 million), Italy ($658 million) and France ($610 million). In debt, most of the AUM is in US government debt ($8 billion), followed by Germany ($978 million) and Europe ($282 million). In commodities, silver is the most popular ($944 million in AUM), followed by oil ($918 million) and gold ($890 million).
Nik Bienkowski, Co-CEO of BOOST ETP commented:
“Globally, investors continue to increase their usage of S&L ETPs. Global S&L ETP assets have risen by $10bn (22%) in 2013 to a record $55 billion. Demand for S&L ETPs was also reflected in BOOST ETP’s AUM having more than doubled in the past 8 weeks. In total, there is $37 billion of assets held in S&L equity ETPs and $3.7 billion of assets held in S&L commodity ETCs globally.”
“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.”
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, ETCs and ETPs. As a result of this increased usage and interest in S&L ETPs, BOOST recently launched this monthly ‘BOOST Short & Leveraged ETF/ETPs Global Flows Report’ and a Short & Leverage ETF / ETP Advisor Tool Kit.
 Between 2nd of May 2013 to 31st Dec 2013