Short & Leveraged ETFs/ETPs Global Report
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 to -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 to +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 US treasuries and leveraged US 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 US focused equity ETPs, while S&L equity sector ETPs experienced outflows of $326 million.
- US 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 US, 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 totalled $82 million for Germany and $222 million for Italy. Since July, there have been net short flows totalling $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 US was the major loser in October with $436 million of outflows.
- October flows in US 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 (totalling $135 million) and silver (at $10 million); while 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 3 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 ’12.
- 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.
Data, Methodology and Terms Used
This report provides statistics of AUM, flows and related measures for short & leveraged ETFs/ETPs. Short & leveraged ETFs/ETPs are ETFs/ETPs whose leverage factor which respect to the underlying asset class is currently -1x or lower and +1.5x or higher. ETFs/ETPs which offer a non-leveraged exposure are not included in the analysis.
Following are some definitions for the terms used in the analyses:
- ETF/ETP is used as a generic, interchangeable term to refer to ETF, ETP, ETN and ETC.
- AUM or Assets represents the assets under management in an ETF/ETP. For some ETFs/ETPs for which the AUM is not available, their market capitalisations have been used where possible.
- Asset Flow or Net Subscriptions, is a measure representing the value of net subscriptions over the period, thus removing the effect of changes due to price.
- Notional AUM is the sum of the AUM in each ETP multiplied by the absolute value of its leverage factor, e.g. $1 in a 3x long ETP or $1 in a -3x short ETP is $3 of Notional AUM in both cases.
- Notional Flow is the net subscriptions for each ETP multiplied by the absolute value of the leverage factor. Alternatively, it is the change in the Notional AUM that is not due to price changes.
- Net Position is the sum of the AUM in each ETP multiplied by its leverage factor (which may be either negative or positive). A negative figure indicates investors are net short.
- Net Position Flow or Repositioning is Notional Flow in long ETPs minus the Notional Flow in short ETPs. Alternatively, it is the change in the Net Position that is not due to price changes and indicates whether investors are bullish (net long) or bearish (net short) after taking leverage factor into account.
- Average Investor Leverage is calculated as the average leverage factor across all ETPs of a certain index / exposure and is weighted by the total AUM and leverage factor for each ETP. Average Investor Leverage is used as a proxy for overall investor sentiment with regard to an asset. It June be biased due to leverage factors on offer for each index / exposure4, and thus the change
The source for the data is calculations by Boost ETP which are performed on underlying price, return, AUM, currency and market capitalisation data from Bloomberg. Any fund description data is also obtained from Bloomberg. All data is as of 31st Oct 2013. All figures are denominated in USD.
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.
The products discussed in this document are issued by Boost Issuer PLC (the “Issuer”) under a Prospectus approved by the Central Bank of Ireland as having been drawn up in accordance with the Directive 2003/71/EC. The Prospectus has been passported from Ireland into the United Kingdom and is available on the websites of the Central Bank of Ireland and the Issuer. Please read the Prospectus before you invest in any Exchange Traded Products (“ETFs/ETPs”). Neither the Issuer nor Boost ETP LLP is acting for you in any way in relation to the investment to which this communication relates, or providing investment advice to you. The information is not an offer to buy or sell or solicitation of an offer to buy or sell any security or investment. You are advised to seek your own independent legal, investment and tax or other advice as you see fit. The value of an investment in ETFs/ETPs may go down as well as up and past performance is not a reliable indicator of future performance. An investment in ETFs/ETPs is dependent on the performance of the underlying index, less costs, but it is not expected to match that performance precisely. ETFs/ETPs involve numerous risks including among others, general market risks relating to the relevant underlying index, credit risks on the provider of index swaps utilised in the ETF/ETP, exchange rate risks, interest rate risks, inflationary risks, liquidity risks and legal and regulatory risks.
ETFs/ETPs offering daily leveraged or daily short exposures (“Leveraged ETFs/ETPs”) are products which feature specific risks that prospective investors should understand before investing in them. Higher volatility of the underlying indices and holding periods longer than a day June have an adverse impact on the performance of Leveraged ETFs/ETPs. As such, Leveraged ETFs/ETPs are intended for financially sophisticated investors who wish to take a short term view on the underlying indices. As a consequence, Boost ETP LLP is not promoting or marketing Boost ETPs to Retail Clients. Investors should refer to the section entitled "Risk Factors" and “Economic Overview of the ETF/ETP Securities” in the Prospectus for further details of these and other risks associated with an investment in Leveraged ETFs/ETPs and consult their financial advisors as needed. This marketing information is derived from information generally available to the public from sources believed to be reliable although Boost ETP LLP does not warrant the accuracy or completeness of such information. All registered trademarks referred to herein have been licensed for use. None of the products discussed above are sponsored, endorsed, sold or promoted by any registered trademark owner and such owners make no representation or warranty regarding the advisability on dealing in any of the ETFs/ETPs.