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Short & leveraged ETP AUM at record level, says Boost

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Assets under management of short and leveraged exchange-traded products at the end of 2013 stood at a record USD55bn, up USD10bn or 22 per cent from 2012, according to Boost Short & Leveraged ETFs/ETPs Global Flows Report for December 2013.

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 used more tactically, AUM and flows data for S&L ETPs can provide valuable timely 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.
 
Despite initial fears over the anticipated unwinding of monetary stimulus last summer, major equity benchmarks in the US, Europe and Japan attained new record levels towards the end of 2013. Boost’s report reveals S&L investors are positioned to gain from a continued rise in equity markets. S&L investors have the most bullish position they have ever had on US equities, at USD13.4bn net long position, and for the first time in nearly six years a net long position on broad European indices, at USD142m net long.
 
Within Europe, sentiment is more mixed with investors in S&L equity ETPs starting 2014 with a net short position on Germany (USD314m) and the UK (USD72m), as well as a net long position on Italy (USD366m) and France (USD136m). 
 
In contrast to equities, AUM in S&L bond ETPs at the start of 2014 is almost exclusively (98 per cent) in short bond ETPs. Persistent worries of when, not if, the US Fed would begin unwinding monetary stimulus caused long dated US Treasury yields to rise by over 100 bps from its lows in June, undermining sentiment in government bonds. With the first USD 10bn taper announced by the Fed in December, S&L investors have been gearing up to gain from rising bond yields, with December flows of USD1.2bn going almost exclusively into short bond ETPs. At the start of 2014, investors’ positions in S&L ETPs are the most bearish they have been on US government debt since June 2011, and the most bearish ever on German and Italian government debt.
 
In commodities, as increasing risk appetite drove investors into the rising equity market, safe haven assets have suffered with precious metals prices tanking. S&L investors have been selling leveraged exchange-traded commodities (ETCs) in favour of short ETCs. Over 2013 investors sold off USD230m worth of leveraged positions and bought USD136 million worth of short positions using S&L ETCs, equating to USD366m net short flows. At the end of 2013 S&L investors had a USD6m net short position in gold for the first time since S&L gold ETCs became available in February 2008.
  
Today, S&L ETPs cover all major assets classes and geographies. In terms of asset allocation at the end of 2013, equity ETPs are the most popular with 68 per cent of total AUM (USD36.8bn), followed by debt (21 per cent, USD11.2bn) and commodities (7 per cent, USD3.7bn). In equities, most of the AUM is focused on US large cap and small cap equities (USD17.6bn), followed by European equities (USD4.5bn). In Europe, Germany large cap equities are the most popular (USD1.3bn of AUM), followed by Europe (USD810m), Italy (USD658m) and France (USD610m). In debt, most of the AUM is in US government debt (USD8bn), followed by Germany (USD978m) and Europe (USD282m). In commodities, silver is the most popular (USD944m in AUM), followed by oil (USD918m) and gold (USD890m).
 
Nik Bienkowski, co-CEO of Boost ETP, says: “Globally, investors continue to increase their usage of S&L ETPs. Global S&L ETP assets have risen by USD10bn (22 per cent) in 2013 to a record USD55bn. Demand for S&L ETPs was also reflected in Boost ETP’s AUM having more than doubled in the past eight weeks. In total, there is USD37bn of assets held in S&L equity ETPs and USD3.7bn of assets held in S&L commodity ETCs globally.”

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