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Global Short & Leverage ETF / ETP assets hit $49.3bn, as equity investors increase bearish positions

Wednesday 12th June '13

  • Boost ETP to launch a monthly Global Short and Leverage ETF/ETP Report
  • Global S&L inflows of $620 million in May as AUM reaches $49.3 billion
  • Equities saw bearish flows in May as investors reduced their long positions and increased their short positions resulting in net short notional flows of $4 billion 
  • Fixed Income investors continue to increase bearish positions, although net positioning in May was long
  • Investors are generally bearish on commodities, with investor sentiment increasingly negative for oil and gold 
London, Wednesday 12 June 2013: Global Short and Leveraged ETP assets rose by $5.1bn (11.5%) in the first five months of 2013 to $49.3bn, 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 is now launching a monthly Global Short & Leverage ETF / ETP Report which complements the recently launched Short & Leverage ETF / ETP Advisor Tool Kit.

Of the $49.3bn of AUM currently held by S&L ETPs globally:
  • $32.7bn is held in S&L equity ETPs. In May, S&L equity investors reduced long positions and increased short positions, resulting in notional net short flows of $4bn
  • $4.2bn of AUM is held in S&L equity ETPs tracking Europe or European countries of which 58% is held in Short equity ETPs. During May, most European equity indices suffered outflows from long ETPs and inflows into short ETPs 
  • $10.0bn is held in S&L fixed income ETPs, of which 87% is held in short fixed income ETPs. However, in May and despite an expected rise in interest rates, S&L fixed income investors increased their notional long positions by over $2bn
  • $4.2bn is held in S&L commodity ETPs, of which 55% is held in long commodity ETCs and 45% is held in short commodity ETCs. Oil and gold turned bearish experiencing net short notional flows of $507m and $287m respectively 
On-exchange traded volumes for S&L ETPs have also increased this year. Increasing from $113bn to $154bn per month, representing a 36% increase. S&L ETPs traded an amount equal to 3.1x their total AUM each month on average. 3x ETPs are being held for approximately 3 days, 2x ETPs for 8 days and -1x ETPs for 14 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. 

Amid flat and low-return markets, BOOST ETP recently 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 portfolio 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:

“Boost is launching its monthly Global Short and Leverage ETF / ETP Report as a result of increased demand for transparent information regarding Short and Leverage ETPs. The report highlights investor bearishness and bullishness across asset classes and indices previously not available in other ETF / ETP reports. The benefits of a report incorporating short ETPs can help to determine whether investors are becoming bearish on certain indices, or whether they are just rotating assets into different indices.

“Global AUM in Short and Leverage ETPs is approaching $50 billion, after increasing by $5.1 billion this year. 58% 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. 

“During May, Short and Leverage equity ETP investors became increasingly bearish with net short notional flows of $4 billion. Since the start of the year, short equity ETP saw notional inflows of $10 billion. Investors also continued to be bearish on gold, however the largest change in commodity ETP flows during May was for oil, with notional net short flows of $507 million”

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 markets. As equity indices hover around medium-term or all-time highs, BOOST ETP has seen an increase in those investors wanting to short the equity market. 

One of the main reasons BOOST chose to focus on 3x Short and 3x Leverage ETPs was feedback received from investors asking for an efficient, robust and transparent way to trade short and leverage. 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.

Source: Sources for all figures within this press release are from Boost ETP Research and Bloomberg