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PRESS ROOM

Short & Leverage Report: August Volatility Drives Global AUM in Short & Leveraged ETPs to Record High $70bn

Wednesday 14th October '15

  • Heightened volatility in August was a key catalyst for driving up AUM in short & leveraged (S&L) ETPs. AUM reached a record $70 billion at the end of September, a 14% rise YTD.
  • S&L Equity ETPs saw substantial inflows with investors pouring over $3.7 billion last month into ETPs tracking US, Japanese and European equities.
  • Meanwhile, S&L’s investors’ bearish positions in US debt reversed following the Fed’s delay in hiking interest rates.
  • YTD inflows into oil S&L ETPs of over $3 billion drove the rise of AUM in commodity ETPs as investors continue to reposition around volatility.
  • AUM and trading volumes in Boost ETPs continue to grow with AUM hitting over $500 million in late August.

London, 14 October 2015: WisdomTree, an Exchange Traded Fund (“ETF”) and exchange traded product (“ETP”) sponsor, and specialist in short & leverage (“S&L”) ETPs through the Boost ETP product range, is proud to announce the release of the Boost Short & Leveraged ETFs/ETPs Global Flows Report for September 2015. The report reveals the AUM of S&L ETPs at the end of September is a record $70 billion, up 14% YTD. The report demonstrates 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.

In terms of asset allocation at the end of September, equity ETPs are the most popular with 72% of total AUM ($50.7 billion), followed by debt (12%, $8.7 billion) and commodities (9%, $6.1 billion). In equities, most of the AUM is focused on US large cap and US small cap equities ($18.5 billion), Asia-Pacific equities ($13.1 billion) and European equities ($6.9 billion). In Europe, broad European indices are the most popular ($2.7 billion in AUM), followed by Germany ($1.7 billion), Italy ($642 million) and France ($541 million). In debt, most of the AUM is in US government debt ($5.2 billion), German government debt ($1.5 billion), and Italian ($266 million) and European-region focused ($263 million) government debt. In commodities, oil is the most popular ($3.3 billion in AUM), followed by natural gas ($936 million), gold ($737 million) and silver ($594 million).

Viktor Nossek, Director of Research for WisdomTree Europe commented:

“September was a strong month for short & leveraged ETPs as investors took advantage of heightened volatility to position opportunistically or hedge their exposures.

Of particular note were the inflows of over $3.7 billion into S&L ETPs tracking US, Japanese and European equities last month. S&L investor sentiment towards US equities was clearly mixed as evident in the build-up of both long and short positions. This was also the case for Europe, with inflows into both long and short ETPs to the tune of $326 million. By contrast, there was bullish sentiment with regards to Japanese equities as S&L investors poured into long positions, bringing inflows over the past 12 months to over $7.3 billion. Within fixed income, S&L investors’ bearish positions reversed in September following the Fed’s decision to not hike interest rates in September. Investors took a more bearish stance on German bunds however, with falling bund yields compelling investors to position bearishly. Similarly, investors were bearish towards crude oil with S&L activity in oil YTD helping to drive up AUM of commodity ETPs to $6 billion.”

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.

-END-

About WisdomTree Europe Ltd.

WisdomTree Investments, Inc., through its subsidiaries in the U.S. and Europe, including WisdomTree Europe Ltd. based in London, is an exchange-traded fund (“ETF”) and exchange traded product (“ETP”) sponsor and asset manager. WisdomTree offers products covering equities, fixed income, currencies, commodities and alternative strategies. Through WisdomTree Europe Ltd, it sponsors WisdomTree UCITS ETFs and Boost short and leverage ETPs. WisdomTree currently has approximately $57 billion in assets under management globally (as of 10 October 2015). For more information, please visit www.wisdomtree.com.

WisdomTree® is the marketing name for WisdomTree Investments, Inc. and its subsidiaries worldwide.

Boost ETPs help expand the investment horizons of investors and allow them to execute a wide variety of strategies which include:

  • Leverage the daily returns of an investment for the same capital as a non-leveraged trade
  • Hedge existing positions in one simple trade
  • Use a long or short strategy to take advantage of any short term rises or falls in the market, especially in a sideways trending market
  • Pair trading to take advantage of undervalued assets
  • Shorting the market efficiently and cheaply without having to arrange and finance complex stock borrowing positions

Similar to exchange traded funds (ETFs), Boost ETPs are liquid, accessible and simple. Boost ETPs can be created and redeemed on a continuous basis by market makers, matching the tremendous liquidity of the underlying markets and can be traded by investors on a regulated exchange in the same way as any equity. Boost ETPs provide accurate and transparent leveraged and short exposure to recognised benchmarks in a single trade. In addition, Boost leveraged and short ETPs require no borrowing of stock or funds to gain the relevant exposure. Boost ETPs are simply priced off transparent indices published by world class index providers.

Boost ETPs are backed by robust risk management where (i) depending on the credit rating of Boost’s counterparties, the mix of sovereign bonds held in the posted collateral will increase, and (ii) no cash or collateral will be delivered by Boost to a counterparty unless Boost has received payment first.

Boost ETP's key features include:

  • Independence - Boost is independent from any investment bank, swap provider, market maker, trustee or custodian
  • Best of breed – Boost’s investors benefit from efficient products with liquidity, strong counterparty risk management and relatively low costs as well as the wealth of experience provided by Boost’s management and world class service providers
  • Transparency – Boost discloses all fees, collateral holdings and details on its website each day
  • Innovative and nimble - Boost aims to be a leader in innovation, as evidenced by the ETPs issued, and the product development and market research behind the products• Focused and specialised - Boost's strategy differs from the existing ETP issuers by not focusing on being everything to everyone
  • Educational - Boost focuses on providing all the educational and thought leadership tools needed by investors

www.boostetp.com

Disclaimer 

WisdomTree Europe Ltd is an appointed representative of Mirabella Financial Services LLP which is authorised and regulated by the Financial Conduct Authority. 

The value of an investment in ETPs may go down as well as up and past performance is not a reliable indicator of future performance. An investment in ETPs is dependent on the performance of the underlying index, less costs, but it is not expected to match that performance precisely. ETPs involve numerous risks including among others, general market risks relating to the relevant underlying index, credit risks on the provider of index swaps utilised in the ETP, exchange rate risks, interest rate risks, inflationary risks, liquidity risks and legal and regulatory risks. 

ETPs offering daily leveraged or daily short exposures (“Leveraged ETPs”) are products which feature specific risks that prospective investors should understand before investing in them. Higher volatility of the underlying indices and holding periods longer than a day may have an adverse impact on the performance of Leveraged ETPs. As such, Leveraged ETPs are intended for financially sophisticated investors who wish to take a short term view on the underlying indices. As a consequence, WisdomTree Europe Ltd is not promoting or marketing BOOST ETPs to Retail Clients. Investors should refer to the section entitled "Risk Factors" and “Economic Overview of the ETP Securities” in the Prospectus for further details of these and other risks associated with an investment in Leveraged ETPs and consult their financial advisors as needed. Within the United Kingdom, this document is only made available to professional clients and eligible counterparties as defined by the FCA. Under no circumstances should this document be forwarded to anyone in the United Kingdom who is not a professional client or eligible counterparty as defined by the FCA. This marketing information is intended for professional clients & sophisticated investors (as defined in the glossary of the FCA Handbook) only. 

This marketing information is derived from information generally available to the public from sources believed to be reliable although WisdomTree Europe Ltd does not warrant the accuracy or completeness of such information. All registered trademarks referred to herein have been licensed for use. None of the products discussed above are sponsored, endorsed, sold or promoted by any registered trademark owner and such owners make no representation or warranty regarding the advisability on dealing in any of the ETPs.