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PRESS ROOM

Global AUM in Short & Leveraged ETPs at record $61bn as investors shun equities and buy bonds

Thursday 13th March '14

  • The AUM of short & leveraged (S&L) ETPs reached a record $61.3 billion at the end of February 2014, a 3.7% rise from January and 6% rise YTD 
  • S&L investors globally repositioned themselves bullishly in bonds and bearishly in equities. February saw record flows into long US debt ETPs, at $2.9 billion, which were countered by flows of $3.8 billion out of long equity ETPs
  • Europe saw short positions in German equity ETPs and bullish flows to broad European indices continued. In contrast, Italy, France and Sweden saw bearish flows, into short ETPs and out of long ETPs
  • S&L investors continue to be bullish on Japanese equities, with inflows of $451 million into long Japanese equity ETPs and global AUM in Japanese S&L ETPs is at a record $3.7 billion, of which 90% is in long leveraged ETPs 
  • Natural gas has the strongest flows in ETCs for the 2nd month running, as S&L investors bought $311 million of natural gas ETCs, most of which was in short ETCs 
  • AUM and trading volumes in BOOST ETPs also continue to reach new records as AUM has risen 83% this year. BOOST ETP experienced $23 million of inflows in February, the largest since Boost launched its first ETPs in December 2012
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 February 2014. The report reveals the AUM of S&L ETPs at the end of February is a record $61.3 billion, up $2.2 billion (or 3.7%) from the end of January 2014 and 6% YTD, demonstrating that investors globally continue to increase their usage of S&L ETPs.

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.

 

We have incorporated a ‘Boostometer’, a gauge for reading sentiment in major asset classes in the ETF/ETP industry. Based on AUM and adjusted for leverage factors, the Boostometer measures the extent to which S&L investors are bullishly or bearishly positioned for the month ahead. A tendency to be bullishly positioned means S&L investors are holding more long than short ETPs, while a tendency to be bearishly positioned means S&L investors are holding more short than long ETPs. 

After capital flight from emerging markets triggered a sell-off in equity markets in the US, Europe and Japan during the latter part of January 2014, sentiment towards risk assets has taken a beating. February saw bearish equity flows against a backdrop of record bullish flows into long US debt ETPs of $2.9 billion. 
 
Within equities, Japan stood out as the only geography where S&L investors significantly increased their bullish positions, with $446 million of flows into long Japanese equity ETPs. S&L investors’ bearish stance was most pronounced in US equities, with $3.8 billion of flows out of leveraged long ETPs only slightly offset by $0.5 billion of flows into short ETPs. Bullish positions were also cut across equity ETPs tracking European countries. S&L ETPs tracking France, Italy and Sweden saw flows out of long ETPs and into short positions. 

Long debt positions started off February at only 2% of S&L debt ETPs (shorts making up 98%) however by the end of February long debt ETP positions comprised 23% of global S&L debt AUM. 
 
Despite the risk-off sentiment taking hold over markets during the second half of January and driving a relative strong recovery in precious metals, the fairly balanced split in AUM between S&L ETPs indicates investors are in doubt about the direction of gold. In contrast, with nearly $0.9 billion (84%) of AUM in S&L silver ETPs comprising long positions, S&L investors’ overwhelmingly bullish positioning remains unaltered.

The strong performance of natural gas this year, up by over 20%, continues to drive S&L investors to short Natural Gas ETPs. Underpinned by high volatility, last month’s bearish positioning in natural gas was augmented in February with $335 million of flows into short natural gas ETPs.
 
Today S&L ETPs cover all major assets classes and geographies. In terms of asset allocation at the end of February 2014, equity ETPs are the most popular with 65% of total AUM ($39.8 billion), followed by debt (22%, $13.6 billion) and commodities (7%, $4.2 billion). In equities, most of the AUM is focused on US large cap and US small cap equities ($14.9 billion), US sector ETPs ($5.5 billion) and European equities ($5.7 billion). In Europe, broad European indices are the most popular ($2 billion in AUM), followed by Germany ($1.2 billion), Italy ($668 million) and France ($585 million). In debt, most of the AUM is in US government debt ($10.3 billion), German government debt ($1.1 billion), Israeli corporate debt ($1 billion) and European government debt ($242 million). In commodities, silver and natural gas are the most popular ($1 billion in AUM each), followed by oil ($904 million) and gold ($834 million). 
 
Viktor Nossek, Head of Research at BOOST ETP commented:
 
“February saw investors in short & leveraged ETPs reposition bullishly in bonds and bearishly in equities. Strong bearish conviction across US and European-country focused equities played out in the unwinding of long positions and building up of short positions. Bonds in developed markets have regained appeal, helped not least by the turmoil in emerging markets that is driving the repatriation of foreign capital back into US Treasuries. This in turn is reviving bullish leveraged positioning in government debt. Against the tactical risk-off allocations occurring in February, global S&L ETP assets have risen to a new record of $61 billion. Demand for S&L ETPs was also reflected in BOOST ETP’s AUM having risen 84% so far this year. In total, there are $36.7 billion of assets held in S&L equity ETPs and $4.2 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 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 Adviser Tool Kit.

FULL REPORT