Boost begins roll-out of triple-leveraged ETPs on London Stock Exchange

Dec 17th, 2012 | By | Category: Alternatives / Multi-Asset

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Following its launch in October, new exchange-traded product (ETP) provider Boost ETP has begun to roll out an initial line-up of products on the London Stock Exchange. [See Boost ETP set to energize European ETF market].

Boost begins roll-out of triple-leveraged ETPs on London Stock Exchange

Boost, Europe’s newest ETP provider, has begun to roll out triple-leveraged products on the London Stock Exchange.

The first batch of ETPs, which are all based on well-known blue-chip indices, provide triple-leveraged long and short exposure to European, UK, German and US equity markets.

Commenting on the launch, Nik Bienkowski, Boost ETP Co-CEO, said: “The new ETPs provide access to some of the most liquid and widely followed European and US equity market benchmarks.”

Gillian Walmsley, Head of Fixed Income Products at London Stock Exchange, said: “We are delighted to welcome Boost ETP for their product debut. London Stock Exchange Group operates Europe’s biggest ETP exchange, underpinned by a diverse set of international investors. This makes for a vibrant, fast growing market, with coverage across a broad range of underlying asset classes.”

Boost’s products have been designed to provide sophisticated investors with instant leveraged exposure to key markets in one single trade, without having to borrow the additional funds to gain the additional long exposure, or the need to borrow the underlying securities and then sell those securities in order to short the market.

Ten products have been launched so far, with an additional ten scheduled to be introduced over the remainder of December.

The line-up so far is as follows (as of 14 December 2012):

Product Name Ticker
Boost FTSE 100 3x Leverage Daily ETP 3UKL
Boost FTSE 100 3x Short Daily ETP 3UKS
Boost LevDAX 3x Daily ETP 3DEL
Boost ShortDAX 3x Daily ETP 3DES
Boost EURO STOXX 50 3x Leverage Daily ETP 3EUL
Boost EURO STOXX 50 3x Short Daily ETP 3EUS
Boost NASDAQ 100 3x Leverage Daily ETP QQQ3
Boost NASDAQ 100 3x Short Daily ETP QQQS
Boost Russell 1000 3x Leverage Daily ETP 3USL
Boost Russell 1000 3x Short Daily ETP 3USS

The long ETPs come with an annual management fee of 0.75%, while the short ETPs come with an annual fee of 0.80%.

The products have a range of uses and can help investors to execute a wide variety of strategies. Strategies include hedging existing positions, implementing tactical short-term directional trades, and capitalising on relative value discrepancies between markets via long/short pair trades.

Demand for leveraged and short products has increased over the past few years, pushing assets to $43 billion globally, as many financial markets have trended sideways, resulting in volatile but poor long-term returns. To illustrate, the average daily change in the DAX index over the past five years has been 1.20%; however, a buy-and-hold investment in the DAX index over this same period would have produced a return of -5.1% (-1.21% per annum).

Leveraged and short ETPs make it possible to take advantage of short-term volatility by accentuating market moves, thereby creating new opportunities to trade.  For example, the Boost LevDAX 3x Daily ETP (3DEL) and Boost ShortDAX 3x Daily ETP (3DES), which provide 3x leveraged long and short exposure to the DAX respectively, would have risen or fallen by approximately 3.60% (i.e. 3x 1.20%) per day on average during this five year period.

Boost’s dedicated focus on leveraged and inverse ETPs (the company has said that it expects to list up to 100 different ETPs across all asset classes over the next two years) should help it towards building a market-leading position in the European market. However, the company will face competition from the likes of ETF Securities, Deutsche Bank’s db X-trackers, RBS, Commerzbank’s ComStage, Amundi, BNP Paribas’ EasyETF, Lyxor, and Xact, all of whom have existing products in this space.

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