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Short and leverage ETPs show tactical positioning


WisdomTree’s Boost’s June report finds assets under management for short and leverage ETPs (S&L ETPs) stands at USD63 billion at the end of June, up 2 per cent YTD.

 The firm explains that S&L ETPs allow investors to express bullish as well as bearish sentiment by investing either short or with leverage. The firm writes: “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.”
Viktor Nossek, Director of Research at WisdomTree Europe says: “June saw investors in Short & Leveraged ETPs reposition bullishly in equities and bearishly in bonds. A strong bullish conviction towards Japanese and European equity markets was evident in the building up of long positions and unwinding of short positions in ETPs tracking them. At the same time, S&L investors cut their US equity exposure by unwinding some of their long and short positions.”
Nossek reports that the bullish repositioning in equity markets outside the US resulted in inflows of USD0.8 billion in S&L equity ETPs globally.
“By contrast, sentiment in fixed income soured, helped not least by the uncertainty of Greece’s membership in the EMU and rising rates expectations in the US as the Fed signalled its readiness to raise the policy rate before the end of this year” Nossek says.
“S&L Investors increased their short positions in US and German government bonds as a result, helping this year’s cumulative inflows into short ETPs tracking debt globally to peak to USD980 million. Where investors lacked conviction was crude oil, underpinned by a directionless but volatile moving oil price that compelled investors to cut back on both their bullish and bearish positions in June.”
Boost was the first to introduce a range of three times short and leverage ETPs in the UK in December 2012, in Italy in October 2013 and within Germany at the end of 2014.
Today, S&L ETPs cover all major assets classes and geographies. The report reveals that in terms of asset allocation at the end of June, equity ETPs are the most popular with 69 per cent of total AUM (USD43.2 billion), followed by debt (15 per cent, USD9.6 billion) and commodities (9 per cent, USD5.8 billion). In equities, most of the AUM is focused on US large cap and US small cap equities (USD16 billion), US sector ETPs (USD6.9 billion) and European equities (USD6.7 billion).
In Europe, broad European indices are the most popular (USD2.8 billion in AUM), followed by Germany (USD1.5 billion), Italy (USD571 million) and France (USD515 million). In debt, most of the AUM is in US government debt (USD6.1 billion), German government debt (USD1.4 billion), Italian (USD308 million) and European-region focused (USD300 million) government debt. In commodities, oil is the most popular (USD3 billion in AUM), followed by natural gas (USD1.1 billion), gold (USD693 million) and silver (USD683 million).

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