Short & Leverage ETP assets up 10% year to date to $48.5bn
- Global S&L AUM up more than 70% since Dec 2008 as Global ETF assets reach record highs
- S&L monthly volumes increase by 40% since Dec 12, to $160 bn per month
- Investors mixed on equities, commodities and bearish on fixed income
- S&L usage up as investors increase demand for transparent Exchange Traded Products (ETPs)
London, Tuesday 21 May 2013: Global Short and Leveraged ETP assets rose by $4.4bn (10%) in the first four months of 2013 to $48.5bn and 70% since Dec 2008, as investors continue to increase their usage of Short and Leveraged (S&L) ETPs. The increase in S&L ETPs is due to a number of factors including:
- an increase in the number of providers offering S&L ETPs
- an increase in the asset classes and indices available in S&L
- improved education and client understanding of how S&L ETPs work
- a general move by investors to move towards transparent, collateralised and on exchange products such as ETFs (Exchange Traded Funds) and ETPs
On-exchange traded volumes have also increased for S&L ETPs, increasing from $113 bn to $160 bn per month since 31 Dec 2012 to 30 April 2013, representing a 40% increment. On average, each of the 700 or so S&L ETPs in existence trade on average an amount equal to 3.3x their total AUM each month. This shows that S&L ETPs are being used for short-term and tactical trading by investors. On average, 3x ETPs are being held for approximately 3 days, 2x ETPs for 8 days and -1x ETPs for 14 days.
Of the $48.5bn of AUM held by S&L ETPs, 69% of assets are held by S&L equity ETPs, 17% in fixed income, 9% in commodities and 2% in FX. 57% of all assets are in Short ETPs (-1x, -2x and -3x) with 43% held in Leveraged (NASDAQ:LONG) ETPs (2x and 3x).
The split between short and long is mixed for equities and commodities. Investors are net short in equity indices covering the US, Germany, UK, China, Switzerland and Spain. ProShares UltraShort QQQ (NYSEARCA:QID) or the Boost NASDAQ 100 3x Short Daily ETP (QQQS) are prime examples of typical US short plays. Investors appear to be net long in Italy, Sweden, Norway and emerging markets. Commodities are also mixed, however the fundamentals for many commodities are very different between sectors. Investors are net short in copper and natural gas. They are net long silver, oil, agriculture and gold (although becoming more bearish). For example, SPDR Gold Shares ETF(NYSEARCA:GLD) is off ~ 30% from its 2011 peak whereas Boost Gold 3x Short Daily ETP (3GOS) up over 45% year to date. In fixed income investors are unanimously bearish as the market expects yields to rise at some stage. ProShares UltraShort 20+ Year Treasury (NYSEARCA:TBT) remains the largest play by AUM in the fixed income S&L space.
Amid flat and low-return markets, BOOST ETP recently launched a platform of 3x leverage and 3x short equity ETPs and commodity ETCs (Exchange Traded Commodities). The platform enables investors to gain leverage exposure to rising or falling markets in order to hedge their portfolio or magnify returns. With low investment returns over the past five or so years, short and leverage ETPs could have been useful investment tools: The return from holding the FTSE 100 over the past five years was only 2% per annum, however the average daily change in the FTSE 100 over this period was 1.05%. Additionally, BOOST ETPs allow investors to execute a wide range of investment strategies such as going short to profit from falling prices, shorting to protect existing positions, going long and short as part of a pairs trade, or using leverage to invest the remaining capital in other assets.
Nik Bienkowski, Co-CEO of BOOST ETP, commented:
"Global AUM in Short and Leverage ETPs is approaching an all-time high of close to $50 billion, after an increase by $4.4 billion this year. Continued inflows show that Short and Leverage ETPs are useful tools for investors, not least because they can be used to hedge portfolios or profit in falling markets. As equity indices continue to break medium-term or all-time highs, we have seen an increase in those investors wanting to go short the equity market.
"One of the main reasons we focused on 3x Short and 3x Leverage ETPs was because investors were telling us they wanted a robust and transparent way to trade short and leverage. BOOST ETPs are liquid, transparent, cost-effective and fully collateralised. In addition, BOOST provides a number of simple and comprehensive educational tools which allows investors to understand how Short and Leverage ETPs work and how they might be used in a portfolio."
Source: Sources for all figures within this press release are from Boost ETP Research and Bloomberg
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I work for Boost ETP.