Short And Leveraged ETFs/ETPs Global Report - Oct. 31, 2013

by: Boost ETP

Summary of Global Assets Under Management

  • The total global AUM of Short & Leveraged (S&L) ETPs at the end of October was $51.5 billion.
  • YTD global S&L ETP AUM is up $6.6 billion, or 15%, compared to 10% for the wider global ETP industry.
  • 52% of AUM is held in short products with leverage factors ranging between -1x and -3x. However, the leverage factor with the most assets is +2x, with 34% of AUM. 45% of AUM is held in long products with leverage factors ranging between +1.5x and +3x.
  • In terms of S&L asset allocation, equity ETPs are the most popular with 68% of AUM, followed by debt with 18% and commodities with 9%.
  • The largest individual S&L ETPs are short U.S. treasuries and leveraged U.S. equities.
  • Turnover in S&L ETPs in October was $173 billion, up 52% from December 2012.

Short & Leverage Equities: Global

  • Currently, there is $34.4 billion of AUM held in S&L equity ETPs of which 59% is held in long ETPs, up from 54% in August.
  • S&L equity ETPs experienced $865 million of inflows in October and $5 billion YTD. Country or region focused ETPs saw inflows of $1.2 billion, led by $1.4 billion in inflows into U.S. focused equity ETPs, while S&L equity sector ETPs experienced outflows of $326 million.
  • U.S.-focused equity ETPs saw record net long flows in October, pushing them into the most bullish net position since S&L ETPs were created in 2005, with an average investor leverage of +0.5x and net long position of $7.7 billion.
  • Japanese equity ETPs saw bullish flows in October, dominated by flows into long ETPs, which continue a trend of net long flows since February.
  • At the end of the month, net positions show S&L ETP investors are the most bullish ever on the U.S., bullish on Japan and South Korea, and bearish on Europe.

Short & Leverage Equities: Europe

  • Currently, there is $4.5 billion of AUM held in S&L equity ETPs tracking Europe or European countries of which 42% is held in long ETPs and 58% is held in short ETPs, with the largest positions being in German ($1.2 billion), broad European ($760 million), Italian ($695 million), and French ($614 million) equities.
  • Investors in S&L European equity ETPs were bearish on Germany and Italy in October with flows out of long ETPs and into short ETPs for both countries. Net short flows totaled $82 million for Germany and $222 million for Italy. Since July, there have been net short flows totaling $829 million in Italian and $613 million in German equities. In contrast, French equities -- which have also been seeing bearish flows out of long and into short ETPs since July -- saw a reversal of that in October with bullish flows into long and out of short ETPs.
  • Investors ended the month net bearish on Germany, France, and broad European equities, and bullish on Sweden, Norway, and Italy.

Short & Leverage Debt: Global

  • Currently, there is $9.4 billion of AUM held in S&L debt ETPs of which 2% is held in long debt ETPs and 98% is held in short debt ETPs.
  • There were $314 million of outflows from debt ETPs in October. However, YTD there was $1 billion of net inflows. The U.S. was the major loser in October with $436 million of outflows.
  • October flows in U.S. debt were bearish and dominated by flows of $848 million out of long debt ETPs and flows of $375 million into short debt ETPs. Germany was also bearish with flows into short ETPs amounting to net short repositioning of $130 million.
  • Investors ended the month with a net short position of $12.7 billion in US debt -- the most bearish since August 2011. Investors are also bearish on German, Italian, European, and Japanese government debt.

Short & Leverage Commodities: Global

  • Currently there is $4.5 billion of AUM held in S&L commodity ETPs of which 56% is held in long commodity ETPs and 44% is held in short commodity ETPs.
  • The S&L commodity ETPs with the most assets are on oil, silver, gold, and natural gas.
  • Overall, S&L commodity ETPs experienced net inflows of $94 million in October, with the highest net inflows going to natural gas (totaling $135 million) and silver (at $10 million). Gold and oil experienced outflows of $27 million and $26 million, respectively.
  • Energy: September and October saw investors make a U-turn on oil ETPs, with bullish flows, into long and out of short ETPs, replacing the bearish flows that had persisted in the preceding four months since May. In contrast, investors in natural gas continued the bullish trend since May with flows out of short and into long ETPs. October amounted to the most bullish flows in S&L natural gas ETPs in three years ($378 net long repositioning), elevating investors' position in natural gas ETPs to the most bullish it has been ($748 million net long position) since February 2012.
  • Precious Metals: Gold S&L ETPs in October saw mixed flows with outflows from both long and short ETPs, amounting overall to net long repositioning of $23 million, which is small relative to the $1.8 billion notional AUM in long ETPs and short ETPs. Silver was the same with very little overall change in investors' net position.

Read the Boost ETP independent Short & Leverage ETF/ETP Global Report from Oct. 31, 2013, here.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: Boost ETP is an independent ETP issuer. This article was written by Viktor Nossek, Head of Research. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article. This communication has been provided by Boost ETP LLP, which is an appointed representative of Mirabella Financial Services LLP which is authorised and regulated by the Financial Conduct Authority.