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Global Short & Leverage ETF / ETP assets hit $51bn, as equity investors become bullish again

Monday 22nd July '13

  • Global S&L inflows of over $2 billion in June as AUM reached $50.9 bn, up nearly $7bn this year as monthly trading volumes rise 70%
  • Equities saw bullish flows in May after being bearish over the previous five months
  • Japanese equities remain popular, increasing their net notional long positions by $934 million as Boost launched Europe’s first Short and Leverage ETPs tracking the TOPIX index
  • Fixed Income investors became bearish, consistent with an expected rise in interest rates
  • Investors became slightly bullish on gold during June, reducing short positions, while investors were also bullish on silver and natural gas

Global Short and Leveraged ETP assets rose by $6.8bn (15%) in the first six months of 2013 to $50.9bn, as investors continue to increase their usage of Short and Leveraged (S&L) ETPs. As a result of this increased usage and interest in S&L ETPs, Boost recently launched 16 new equity S&L ETPs, taking its platform to 36 ETPs.  The new launch included the world’s first FTSE 250 S&L ETPs, Europe’s first S&L Japanese equity ETPs tracking the TOPIX index, plus additional leverage factors (-1x, -2x and +2x) for Boost’s most popular products which include FTSE 100 and gold.

Of the $50.9bn of AUM currently held by S&L ETPs globally:

  •   $35.4bn is held in S&L equity ETPs. In June, S&L equity investors increased long positions and reduced short positions, reversing a trend from the first five months of 2013 and resulting in notional net long flows of $4.1bn in June.
  •   $4.1bn of AUM is held in S&L equity ETPs tracking Europe or European countries of which 54% is held in Short equity ETPs. During June, all the major European equity indices covered experienced increasing net long positions.
  •   $9.2bn is held in S&L fixed income ETPs, of which 98% is held in short fixed income ETPs which is consistent with a strong expectation of rising interest rates.
  •   $3.9bn is held in S&L commodity ETPs, of which 51% is held in long commodity ETCs and 49% is held in short commodity ETCs. Investors are currently bullish on gold, silver and natural gas, and bearish on oil.

On-exchange traded volumes for S&L ETPs have also increased this year. Increasing from $114bn to $195bn per month, representing a 71% increase. S&L ETPs traded an amount equal to 3.8x their total AUM each month on average. 3x ETPs are being held for approximately 3 days, 2x ETPs for 10 days and -1x ETPs for 15 days suggesting that investors are using S&L ETPs for short-term and tactical trading.

Investors are increasing their use of 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 due to current market conditions. 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.

Amid flat and low-return markets, Boost ETP also launched a platform of 3x Short and 3x Leverage equity ETPs and ETCs (Exchange Traded Commodities). The platform enables investors to gain leverage exposure to rising or falling markets in order to hedge their portfolios or magnify returns. Additionally, Boost ETPs allow investors to execute a wide range of investment strategies. For example, using short ETPs to profit from falling prices or protect existing positions, using a long and short ETFs / ETP as part of a pairs trade, or using leverage to invest the remaining capital in other assets.

Nik Bienkowski, Co-CEO of Boost ETP, commented:

“During June, Short and Leverage equity ETP investors became bullish on equities, reversing the trend of increasing short positions for the first five months of 2013.  Fixed Income investors increased net short positions, consistent with an expected rise in interest rates.

“Leveraged Japanese equity ETPs were again extremely popular as one of this year’s hottest trades continued unabated.  As a result of this demand and also due to the bull run in equity positions, Boost this week launched Europe’s first Short and Leveraged TOPIX ETPs allowing investors to go 2x long or 1x short Japanese equities.

“Demand for S&L ETPs is continuing at a rapid pace in 2013, with Global AUM in Short and Leverage ETPs reaching $51 billion up $6.8 billion this year, with volumes also increasing 70% in 2013 to $195bn in June. 57% of global Short and Leverage ETPs assets are currently short, indicating that investors are commonly using Short ETPs to hedge portfolios or take a view on a negative conviction.

Continuing inflows into the Short and Leverage ETP market show that these types of products are useful tools for investors, not least because they can be used to hedge portfolios or profit in falling. Boost ETPs are liquid, transparent, cost-effective and fully collateralised. In addition, Boost provides a number of simple and comprehensive educational tools which allows investors to understand how Short and Leverage ETPs work and how they might be used in a portfolio.

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