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Global AUM in Short & Leverage ETPs is $60bn as investors cut positions

Tuesday 15th July '14

  • Short & Leverage (S&L) ETP/ETF investors cut their exposure to equities as outflows overwhelmed inflows in US, Europe and Japan ETPs. Outflows in US debt ETPs also exceeded inflows into German debt ETPs.
  • Bearish repositioning by S&L investors underpinned flows in equity and debt ETPs, with Japan recording $780 million in redemptions of long ETPs.
  • A contrarian stance by S&L investors took hold over commodities, as sharp falls in natural gas futures accompanied bullish flows in natural gas ETPs, while the marked rally in silver futures coincided with bearish flows in silver ETPs. 
  • The AUM of S&L ETPs stood at $60 billion at the end of June. At the end of June BOOST reached a record $113 million AUM. Since the beginning of the year AUM rose 168%, matched with trading volume close to $1 billion in the same period.

London, 15 July 2014: BOOST ETP, 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 June 2014. The report reveals that $60 billion of AUM is held in S&L ETPs as at the end of June, which is down 1.7% from the end of May and up 3.5% 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.
In cutting their exposure across major equity markets, most notably in Japan, US and Europe, S&L investors repositioned bearishly in June. Bearishness was most pronounced in Japanese equities, where $780 million in long positions were redeemed. 


Bearish repositioning by S&L investors also took hold over US equities and European country focused equity ETPs. Within US equity ETPs, $535 million redemptions in long ETPs accompanied $298 million creations in short ETPs. Within European equity markets, the inflows into short ETPs with a leverage factor of -2x coinciding with outflows from long ETPs with a leverage factor of +2x underscored S&L investors’ strong bearish conviction in Italy and Germany. In contrast, the flows in UK and French equity ETPs were bullish. Having seen major bearish repositioning in May amidst lacklustre equity markets in France and the UK, S&L investors took a contrarian bet in equity markets there in June. 
US debt ETPs saw $1.3 billion of outflows from long positions, a marked reversal from the $1.9 billion of inflows in May. Upbeat producer and consumer sentiment indicators for the US, combined with the Fed’s confident tone in justifying the trimming of QE by another $10 billion per month may have driven S&L investors to cut their long positions.
The contrarian stance taken by S&L Investors in silver and natural gas underscored sentiment in commodities. The sharp fall in natural gas futures accompanied bullish repositioning in natural gas ETPs, while the marked rally in silver futures coincided with bearish repositioning in silver ETPs. Despite these flows however, S&L investors remain predominantly bearishly allocated in natural gas (30% of AUM held as long positions) and bullishly allocated in silver ETPs (87% of AUM held as long positions). 
Today S&L ETPs cover all major assets classes and geographies. In terms of asset allocation at the end of June, equity ETPs are the most popular with 69% of total AUM ($41.5 billion), followed by debt (18%, $10.9 billion) and commodities (7%, $4 billion). In equities, most of the AUM is focused on the US (US large cap, US small cap and US sector equities of $22.3 billion) and European equities ($6.2 billion). In Europe, broad European indices excluding sector focused ETPs are the most popular ($2.5 billion in AUM), followed by Germany ($1.3 billion), Italy ($665 million) and France ($574 million). In debt, most of the AUM is in US government debt ($7.9 billion), German government debt ($1.1 billion) and European government debt ($224 million). In commodities, natural gas ($886 million of AUM), silver ($1 billion of AUM) oil ($984 million of AUM) and gold ($822 million of AUM) are the most popular. 
Viktor Nossek, Head of Research at BOOST ETP, A WisdomTree Company, commented:
“June saw S&L investors cutting their exposure to equity and debt markets and in the process have repositioned more bearishly. The persistent uptrend in major equity markets globally is likely to have triggered a more cautious stance. Nevertheless, despite the flows in equity ETPs being underpinned by the unwinding of relative large long positions, S&L investors’ equity allocations in US, Japan and European region focused equity markets continue to remain biased towards a bullish stance, even as they remain overwhelmingly bearish on bonds. Opportunistic repositioning in June occurred mainly on the margin in UK and French equities, where bullish flows coincided with falling equity market prices there, and in commodities, where a strong contrarian conviction by S&L investors was evident in silver and natural gas
Globally, there are $41.5 billion of assets held in S&L equity ETPs and $4 billion of assets held in S&L commodity ETCs.
Demand for S&L ETPs was also reflected in BOOST ETP’s AUM, which stood at $113 million at the end of June 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.”
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.