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Gold investors become bullish while equity investors are mixed, as Global Short & Leverage ETF / ETP assets hit $51bn

Wednesday 18th September '13

  • Global S&L AUM remains at around $51bn, up nearly $7bn this year, despite falls in AUM of non-leveraged products 
  • Equity investors were mixed. US equities experienced inflows into both short and long S&L ETPs, while Europe was bearish. Overall, the average leverage factor for equity ETPs fell
  • Fixed income investors are unanimously bearish
  • Commodity ETP investors were bullish on gold and natural gas, and bearish on copper and oil 
  • S&L ETP investors were also bearish on silver, despite Boost Silver 3x Leverage Daily ETP being the top performing ETP on the LSE in August
Boost ETP, the award winning and independent exchange-traded product (ETP) provider, has released its Global Short & Leverage ETF / ETP report for August. Global Short and Leveraged ETP assets have risen by $6.8bn (15%) in the first eight months of 2013 to $51.1bn, as investors continue to increase their usage of Short and Leveraged (S&L) ETPs. Demand for S&L ETPs was also supported by Boost ETPs’ AUM, having doubled between June and end of August.
Of the $51.1bn of AUM currently held by S&L ETPs globally:
• $35.1bn is held in S&L equity ETPs. In August, S&L equity investors increased both long positions and short positions, however there was $1.5bn of net long notional flows.
• Equity ETPs: $4.3bn of AUM is held in S&L equity ETPs tracking Europe or European countries, of which 54% is held in short ETPs. During August, nearly all the major European equity indices experienced outflows from long ETPs and flows into short ETPs, resulting in net short notional flows.
• Fixed income ETPs: $9.1bn is held in S&L fixed income ETPs, of which 98% is held in short ETPs, which is consistent with a strong expectation of rising interest rates.
• Commodity ETPs: $4.6bn is held in S&L commodity ETPs, of which 59% is held in long commodity ETCs and 41% is held in short commodity ETCs. Investors are currently bullish on gold, silver, copper and natural gas, and bearish on oil.
• Energy ETPs: since May, investors have placed net notional short positions of nearly $2bn in oil and $945m long on natural gas.
On-exchange traded volumes for S&L ETPs have also increased this year although volumes were down for the summer months. 3x ETPs are being held for approximately 3 days, 2x ETPs for 10 days and -1x ETPs for 15 days suggesting that many investors are using S&L ETPs for short-term trading and hedging.
Boost ETP is also experiencing rising investor demand for its robust and transparent S&L ETPs. Recently, a single investor traded $19 million of Boost EURO STOXX 50 3x Short Daily ETP (3EUS) which was the equivalent to a total notional exposure value of $57 million. Recently, trading volumes of Boost ETPs have risen dramatically with increased interest in products providing exposure to short oil, short EURO STOXX 50, leverage FTSE 250 and leverage FTSE 100. 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.
Nik Bienkowski, Co-CEO of Boost ETP, commented:
“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. 56% 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. A recent $19m ($57m notional) trade in Boost EURO STOXX 50 3x Short Daily ETP (3EUS) highlighted this, in addition to highlighting the liquidity of ETPs.

Flows into S&L equity ETPs in August were mixed, however; ETP investors were bearish on Europe and emerging markets while they continue to be bullish on Japan. After the drop in precious metal prices this year, ETP investors have become more bullish on gold, turning around a 9 month trend to June prior to this. Another significant change was the bullish view on copper, with a large reduction in short copper ETPs. Oil ETPs continued their bearish trend which begun around November 2012 while since May, there has been $2bn of net short positions in oil.”
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.