Global Inverse and Leveraged ETF Assets Near $50 Billion

ETF Trends

Global Short and Leveraged ETP assets rose by $5.1bn (11.5%) in the first five months of 2013 to $49.3bn, as investors continue to increase their usage of Short and Leveraged (S&L) ETPs.

Of the $49.3bn of AUM currently held by S&L ETPs globally:

  • $32.7bn is held in S&L equity ETPs. In May, S&L equity investors reduced long positions and increased short positions, resulting in notional net short flows of $4bn
  • $4.2bn of AUM is held in S&L equity ETPs tracking Europe or European countries of which 58% is held in Short equity ETPs. During May, most European equity indices suffered outflows from long ETPs and inflows into short ETPs
  • $10.0bn is held in S&L fixed income ETPs, of which 87% is held in short fixed income ETPs. However, in May and despite an expected rise in interest rates, S&L fixed income investors increased their notional long positions by over $2bn
  • $4.2bn is held in S&L commodity ETPs, of which 55% is held in long commodity ETCs and 45% is held in short commodity ETCs. Oil and gold turned bearish experiencing net short notional flows of $507m and $287m respectively

On-exchange traded volumes for S&L ETPs have also increased this year. Increasing from $113bn to $154bn per month, representing a 36% increase. S&L ETPs traded an amount equal to 3.1x their total AUM each month on average. 3x ETPs are being held for approximately 3 days, 2x ETPs for 8 days and -1x ETPs for 14 days suggesting that investors are using S&L ETPs for short-term and tactical trading.

Investors are increasing their use of 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 due to current market conditions. There is also a move towards independent, transparent and exchange traded instruments such as ETFs and ETPs.

Global AUM in Short and Leverage ETPs is approaching $50 billion, after increasing by $5.1 billion this year. 58% 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.

During May, Short and Leverage equity ETP investors became increasingly bearish with net short notional flows of $4 billion. Since the start of the year, short equity ETP saw notional inflows of $10 billion. Investors also continued to be bearish on gold, however the largest change in commodity ETP flows during May was for oil, with notional net short flows of $507 million.

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 markets. As equity indices hover around medium-term or all-time highs, Boost ETP has seen an increase in those investors wanting to short the equity market.

Boost is an independent boutique ETP provider.

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