Boost launches S&L volatility and emerging market ETPs

Jun 14th, 2016 | By | Category: Equities

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Exchange-traded product provider Boost ETP, a WisdomTree Europe companyhas listed three new ETPs on the London Stock Exchange. The three funds offer investors leveraged exposure to the VIX Index, as well as leveraged and short exposure to emerging market equities.

WisdomTree launches Boost volatility and emerging market ETPs

Viktor Nossek, Director of Research at WisdomTree Europe.

The Boost S&P 500 VIX Short-Term Futures 2.25x Leverage Daily ETP provides 2.25 times the daily performance of the S&P 500 VIX Short-Term Futures Index. The index measures the return from a daily rolling long position in the first and second month VIX futures contract. The VIX index, also known as the ‘fear index’, represents the implied volatility of options on the S&P 500.

The ETP offers a tool for investors to position themselves against rising risks in equity markets. Long positions in the VIX index benefit from increased volatility in the underlying options and can be used  as a hedge against potential large and sudden drops in the US equity market. For example, the S&P 500 Index lost 10.5% of its value between the start of the year and 11 February 2016; over the same period the VIX index gained 50.4%.

The performance of the ETP reflects its index return, adjusted for fees and costs inherent to maintaining and rolling a leveraged position in the futures, plus interest revenue earned on the collateralized amount.

Viktor Nossek, Director of Research at WisdomTree Europe, commented in a statement: “This year’s volatility underpinned by China’s slowdown and slumping commodities has soured sentiment in risk assets, forcing global growth expectations down and creating opportunities to position bearishly in equities. US equity markets’ relative high exposure to tech stocks suffering from recent disappointing financial results and downgraded growth expectations has added to the rise in volatility in this region.

“With a leveraged S&P 500 VIX short-term futures ETP, investors can tactically and efficiently position around rising risks in equity markets by using less capital to obtain the same (unlevered) exposure or amplify their exposure with the same capital.”

The Boost Emerging Markets 3x Leverage Daily ETP and the Boost Emerging Markets 3x Short Daily ETP provide three times long and three times short exposure to the daily performance of the Emerging Equities Rolling Futures Index. In both cases the products’ return reflects fees and costs required to maintaining and rolling the leveraged position in the futures, plus interest revenue earned on the collateralized amount.

The Emerging Equities Rolling Futures Index tracks front-quarter and second-quarter MSCI Emerging Markets Index futures. The MSCI Emerging Markets Index provides exposure to the equity market performance of 23 emerging market countries: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, Philippines, Poland, Russia, Qatar, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates. With 835 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country covered.

The MSCI Emerging Markets Index is up 18.6% from its 2016 low on 20 January to 10 June.

Nossek continued: “The geared long-and-short ETPs tracking Emerging Markets are a way to position tactically around the uncertainty in the region, as 2016 begins with a stark divergence in the outlook on growth within the region: Russia and Brazil are in recession, China’s politically orchestrated rebalancing is enforcing an economic slowdown, even while India still sustains a boom.

“However, much of these expectations remain driven by volatile commodity prices, and the recent rebound of crude oil is giving EM commodity exporter stocks another boost. Until the dust settles and the economic picture for the region stabilises, investors may look for short-term opportunities to trade in and out, or hedge their EM exposure which, using leverage, requires less capital to achieve. These new products provide investors with a new set of momentum and hedging opportunities within the Boost S&L ETP range.”

The ETPs launched by WisdomTree include:

Boost S&P 500 VIX Short-Term Futures 2.25x Leverage Daily ETP – USD (VIXL)
Boost S&P 500 VIX Short-Term Futures 2.25x Leverage Daily ETP – GBP (VILX)
Boost Emerging Markets 3x Leverage Daily ETP – USD (3EML)
Boost Emerging Markets 3x Leverage Daily ETP – GBP (3ELM)
Boost Emerging Markets 3x Short Daily ETP – USD (3EMS)
Boost Emerging Markets 3x Short Daily ETP – GBP (3SEM)

Each product has a total expense ratio of 0.99%.

The Boost ETP product range numbers 144 listings across the Borsa Italiana, London Stock Exchange and Germany’s Xetra. The platform covers all major asset classes including equities, volatility, fixed income, currencies, and commodities.

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