Short and leveraged (S&L) ETPs and ETFs held USD58 billion of AUM at the end of November, according to Boost ETP, a decrease of 5% from the end of October 2014 and effectively flat from the end of December 2013.
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.
S&L ETPs cover all major assets classes and geographies. In terms of asset allocation at the end of October, equity ETPs are the most popular with 69% of total AUM (USD40.1 billion), followed by debt (16%, USD9.3 billion) and commodities (6%, USD3.6 billion). AUM in currency and alternative ETPs comprise USD4.9 billion. In equities, most of the AUM is focused on the US (USD16.3 billion, excluding US sector equities of USD6 billion) and European equities (USD5.8 billion). In Europe, broad European region indices (excluding sector focused ETPs) are the most popular (USD2.3 billion in AUM), followed by Germany (USD1.2 billion), Italy (USD615 million) and France (USD521 million). In debt, most of the AUM is in US government debt (USD6.4 billion), German government debt (USD1.1 billion) and Italian government debt (USD239 million). In commodities, natural gas (USD985 million of AUM), oil (USD853 million of AUM), gold (USD703 million of AUM) and silver (USD685 million of AUM) are the most popular.
Viktor Nossek, Director of Research for WisdomTree Europe, says: “Demand for S&L ETPs was also reflected in BOOST ETP’s AUM, which stood at USD155 million at the end of November 2014. 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.
“Last month saw S&L investors markedly cutting their exposure to major equity markets as the crash in oil leaves a big question mark on its net impact on global growth. As equity markets struggled to sustain momentum, investors overwhelmingly sold their long leveraged exposures to equities, choosing to sit on cash. While the absence of S&L investors’ conviction on US Treasuries also drove outflows from both long and short ETPs tracking US debt, the strong contrarian view in energy commodities was evident in the ongoing build-up of bullish positions in oil. When the dust settles on the direction of crude oil and its global macro implications for energy exporters and importers, S&L investors are likely to reposition back into equities and fixed income ETPs.”