Boost adopts S&P 500 for 3x short and leveraged US large-cap ETPs

Jul 23rd, 2015 | By | Category: Alternatives / Multi-Asset

Boost ETP, a leading European provider of short and leveraged exchange-traded products and a subsidiary of WisdomTree Europe, has changed the underlying index for its 3x short and leveraged US large-cap equity products. The products were previously linked to the Russell 1000 Index but are now referenced to the more widely followed S&P 500 Index.

Boost adopts S&P 500 for 3x short and leveraged US large-cap equity ETPs

Boost has adopted the widely followed S&P 500 Index for its pair of 3x short and leveraged US large-cap equity ETPs.

In line with the index change and to reflect the superior brand recognition of the S&P 500, the two ETPs have been renamed Boost S&P 500 3x Short Daily ETP (3USL) and Boost S&P 500 3x Leverage Daily ETP (3USS), providing short and leveraged exposure, respectively, to the S&P 500.

The S&P 500 measures the performance of 500 of the largest publically traded companies by market capitalisation in the US and is one of the world’s most important indices and a general barometer of US stock market performance. Globally, more than $2 trillion of passive assets are indexed to the S&P 500.

By contrast, the Russell 1000 tracks the 1000 largest listed US companies by market capitalisation, thus reaching slightly further down the size spectrum. As a result, the ETPs will now deliver exposure to a more concentrated, though still well diversified, portfolio of generally larger-sized companies.

The index change will likely increase the appeal and liquidity of the two products and comes at a time when both trading volumes and assets under management at Boost reach new highs. At the product level, AUM within these two particular ETPs has more than doubled in the past month, while across the entire Boost ETP range turnover has been growing at an average rate of over 40% per month for the past two years, to approximately $1.1bn in June, or $3.3bn in notional terms.

Commenting on the index change, Nik Bienkowski, Co-CEO of WisdomTree Europe, said: “We are pleased to be working with a leading index provider such as S&P Dow Jones Indices, and to bring one of the world’s most recognisable US equity indices on to our platform. Demand for S&L ETPs has been increasing month on month, with demand for 3x short US equities increasing by 100% this month, along with record demand for 3x leverage oil. Due to this increased demand and switch to the S&P 500 index, investors in Boost’s US equity ETPs should benefit from tighter spreads and improved liquidity throughout the European trading day.”

Phil Murphy, Vice President of North American Equities at S&P Dow Jones Indices, added: “We are pleased to further our relationship with WisdomTree Investments through the licensing of our iconic S&P 500 stock market index. S&P Dow Jones Indices already has a strong relationship with WisdomTree in the US, and this agreement via its subsidiary, WisdomTree Europe, further strengthens the association.”

Although representing only a tiny percentage of global ETP assets, short and leveraged ETPs are progressively gaining market traction as investors increasingly come to recognise the flexibility and multi-functionality these products offer, such as the ability to: leverage the daily returns of an investment for the same capital as a non-leveraged trade; hedge existing positions in one simple trade; to deploy a long or short strategy to take advantage of any short-term rises or falls in the market, especially in a sideways trending market; pair trade to take advantage of undervalued assets; and to short the market efficiently and cheaply without having to arrange and finance complex stock borrowing positions.

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