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Global AUM in Short & Leveraged ETPs at $61bn

Wednesday 11th June '14

  • US equities saw bearish flows as bearish sentiment took hold of Short and Leverage (S&L) investors in May, 2014, with $3.2 billion redemptions in long positions from US equity ETPs coincided with $1 billion creations in short positions.

  • Bearish sentiment dominated flows in European equities, with equity ETPs focused on pan-Europe, UK, Germany and France experiencing flows into short positions on the back of outflows from long positions.

  • Bullish flows in natural gas and bearish flows in oil drove S&L commodity ETCs (Exchange Traded Commodities) in May, 2014, with natural gas seeing outflows of $109 million from short positions and inflows of $27 million into long positions.
  • The AUM of S&L ETPs stood at $61 billion at the end of May, 2014. In the first quarter of 2014 BOOST surpassed the $100 million mark in AUM. BOOST ETP’s AUM has risen 129% since the beginning of the year, matched by rising trading volumes and improving spreads.

BOOST ETP, A WisdomTree Company, Europe’s award winning and 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 May 2014. The report reveals the AUM of S&L ETPs for the month of May 2014 is at $61 billion, down 0.8% from the end of April 2014 and up 5% from the end of December 2013. 

The BOOST Short & Leveraged ETFs/ETPs Global Flows Report highlights the key flows and trends in S&L ETPs across asset classes and geographies. 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.
Lacking momentum, equity markets in the first half of May 2014 compelled S&L investors to reduce their bullish stance in US and European equities, where the picture was that of significant flows out of long ETPs and into short ETPs. The bearish ETP flows were relatively large in the US, with $2.4 billion of net long redemptions comprising 13% of US equity ETP’s AUM (AUM taken from April 2014). Pan-European, UK, German and French equity ETPs also saw on net bearish inflows of $107 million. Bearishness of S&L investors was most pronounced in UK equities. 
In contrast, S&L investor bullishness was evident in Italian equities, where flows out of short ETPs and into long ETPs resulted in net long inflows of $64 million or 11% of AUM (AUM taken from April 2014) in Italian equity ETPs.
US debt ETPs saw $2.3 billion of bullish inflows. The inflows were large, considering these comprised of 31% AUM (AUM taken from April 2014) in US debt ETPs.
Dominating the flows in ETCs was natural gas, where bullish repositioning resulted in $109 million flows out of short ETPs coinciding with $26 million of flows into long ETCs. In oil, bearish repositioning resulted in $83 million of flows in short ETCs and $10 million redemptions in long positions.
Today S&L ETPs cover all major assets classes and geographies. In terms of asset allocation at the end of May 2014, equity ETPs are the most popular with 68% of total AUM ($41.3 billion), followed by debt (20%, $12.1 billion) and commodities (6%, $4 billion). In equities, most of the AUM is focused on the US (US large cap, US small cap and US sector equities of $22.1 billion) and European equities ($6.3 billion). In Europe, broad European indices are the most popular ($2.6 billion in AUM), followed by Germany ($1.4 billion), Italy ($734 million) and France ($542 million). In debt, most of the AUM is in US government debt ($9.1 billion), German government debt ($1 billion) and European government debt ($230 million). In commodities, natural gas ($911 million of AUM), silver ($890 million of AUM) and oil ($995 million of AUM) and gold ($827 million of AUM) are the most popular. 
Viktor Nossek, Head of Research at BOOST ETP, A WisdomTree Company, commented:
“May 2014 saw S&L investors trade bearishly in equities and bullishly in bonds, helped by lacklustre risk sentiment in the first of half of the month that saw equity markets broadly flat. 

A strong risk off conviction was evident in S&L equity ETP flows, where flows into short ETPs were compounded by large outflows from long ETPs, at the same time that the opposite flows underpinned S&L bond ETPs. Italy stood out as the main key equity market where S&L investors have positioned more bullishly. The substantial flows in equities and bonds in May were in contrast to last month’s flows which were largely confined to commodities. 

Globally, there are $41 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 having surpassed the $100 million landmark by the end of the first quarter of 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.