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S&L ETP AUM up 0.5% in February

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The total global AUM of Short & Leveraged (S&L) ETPs totalled USD61.7 billion at the end of February 2015, up 0.5% from the end of January and flat compared to December 2014, according to figures released by BOOST ETP.

Some 40% of AUM is held in short products with leverage factors ranging between -1x to -3x. 57% of AUM is held in long products with leverage factors ranging between +2x to +3x. The leverage factor with the most assets is +2x, with 38% of AUM.
 
The largest individual S&L ETPs are short US government debt and leveraged US equities.
 
Viktor Nossek, Director of Research at WisdomTree Europe, says: “In terms of S&L asset allocation, equity ETPs are the most popular with 69% of AUM, followed by debt with 13% and commodities with 10%. The remainder is allocated between currency and alternative ETPs.”
  
Currently there is USD42.8 billion of AUM held in S&L equity ETPs, a decrease of 0.9% from January. 69% of equity ETPs globally are held in leveraged (long) ETPs, 31% in short ETPs.
 
AUM in S&L US equity ETPs (including Size and Style but excluding Sectors as objective*) was USD16.5 billion whilst US sector focused equity ETPs had USD6.9 billion in AUM.
 
Nossek says: “Outflows from S&L equity ETPs globally continued into February, with investors pulling out USD2.6 billion. There was some evidence of investors repositioning bearishly, with short ETPs enjoying inflows of USD1.1 billion, at the expense of long ETPs which suffered USD3.7 billion in outflows.
 
“Driving the outflows of equity ETPs globally was Japan, where investors sold USD1.9 billion of long ETPs, suggesting a more bearish stance of S&L investors towards Japanese equities.”
 
European Equities
 
Current AUM of S&L equity ETPs tracking Europe (including Size and Style but excluding Sectors as objective**) stands at USD6 billion with USD2.5 billion tracking the European region and USD3.5 billion tracking individual European countries. ETPs tracking European sectors (region and country specific) recorded USD1.4 billion in AUM.
 
There was less conviction of S&L investors on Europe as a region, with USD117 million flowing into long ETPs and USD84 million flowing into short ETPs.
 
Nossek adds: “European country focused ETPs saw bearish flows, with USD282 million inflows into short ETPs and USD132 million outflows from long ETPs. Likely as a result of downbeat sentiment on bank stocks caused by uncertainty around the extension of Greece’s bailout program, ETPs tracking Italian equities saw the largest outflows from long positions, followed by Russian, Spanish and Italian equities.”
  
The AUM of S&L debt ETPs globally is currently USD8 billion, up 5.4% from January but down 5.5% from the end of December. With 93% of AUM held in short ETPs, S&L investors remain overwhelmingly bearishly positioned in debt.
 
Breaking down the AUM of S&L debt ETPs, USD7 billion is in government debt ETPs and USD0.65 billion in corporate debt and preferred stock ETPs. The remaining USD0.34 billion in AUM is held in a combination of government debt, corporate debt and alternative (sector focused) debt.
 
USD5.2 billion of S&L ETPs track US focused debt, equivalent to 66% of global S&L debt ETPs. S&L ETPs tracking European debt account for USD1.6 billion in AUM, or 21% of global S&L debt ETPs, most of which is German government bonds. The remaining 13% of AUM in S&L ETPs track debt focused in Asia (predominantly Japanese government bonds) and the Middle East.
 
Nossek says: “Ever lower yields on core Eurozone government bonds have left investors wondering just how much lower they can go and whether or not European government bonds currently represent fair value. The view of S&L investors towards German bonds, in particular, is that they may be too expensive. Last month, this prompted bearish flows of USD99 million into short German debt ETPs.
 
“In the US, investors have repositioned bullishly by selling USD126 million of short ETPs. Due to subdued inflation, investors may have anticipated a further delay in the first interest rate hike by the Fed.”
 
S&L commodity ETPs are dominated by gold, silver, oil and natural gas, representing 94% of total AUM. Oil is currently the largest commodity ETP with USD2.9 billion in AUM, followed by natural gas with AUM of USD961 million. Gold and silver are the 3rd and 4th largest commodity ETPs, with USD903 and USD742 in AUM respectively.
 
AUM of S&L commodity ETPs have increased sharply by 98% since December 2014. This increase in AUM has been driven almost entirely by oil ETPs with investors keen to position around oil’s future price path.
 
Nossek says: “Following the slide in oil prices last year, investors have taken up increasingly bullish positions since the turn of the year in anticipation of oil prices rebounding. February inflows into long ETPs tracking crude oil amounted to more than USD566 million in February, following USD851 million inflows in January.”

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