Boost lists leveraged VIX and EM ETFs on Borsa Italiana

Mar 17th, 2016 | By | Category: Alternatives / Multi-Asset

Short and leveraged exchange-traded product provider Boost has listed three new ETPs on Borsa Italiana giving investors a play on emerging markets equities and equity volatility. Two of the new offerings provide 3x long and 3x short exposures to the return on rolling futures tied to emerging market equities while another offers leveraged long exposure to a daily rolling position of futures tied to the VIX index.

Boost launches leveraged volatility and emerging markets ETPs on Borsa Italiana

Nik Bienkowski, Co-CEO of WisdomTree Europe.

Nik Bienkowski, Co-CEO of WisdomTree Europe, the parent company to Boost, said in a statement: “Boost, as an issuer, is delighted to be at the forefront of meeting demand from clients to extend our already market leading range of ETPs in the Italian market. These new products provide additional diversification opportunities and solutions to allow our clients to manage their portfolio exposures.  These exciting new listings help build our coverage across all the key asset classes including a unique exposure to equity volatility.”

The Boost Emerging Markets 3x Leverage Daily ETP (3EML) provides triple the daily performance of the Emerging Equities Rolling Futures Index, which tracks front quarter and second quarter MSCI Emerging Markets Index futures. The Boost Emerging Markets 3x Short Daily ETP (3EMS) provides triple the daily inverse performance of the aforementioned index. The return on the index represents the underlying performance of the MSCI Emerging Markets Index, fees and costs inherent to maintaining and rolling a leveraged position in the futures, plus interest revenue earned on posted collateral. Each ETP has a total expense ratio of 0.99%.

The MSCI Emerging Markets Index is a free float-adjusted market capitalization index designed to measure the equity market performance of 23 emerging market countries including: 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, this index covers approximately 85% of the free float-adjusted market capitalization in each country covered.

As of 29 February 2016, the countries with significant weightings in the index include China (24.3%), South Korea (15.4%), Taiwan (12.9%), India (8.1%) and South Africa (6.9%). The major sector weightings are financials (27.0%), information technology (20.8%), consumer discretionary (9.8%), consumer staples (8.5%) and energy (7.5%).

Viktor Nossek, Director of Research at WisdomTree Europe, added: “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 emerging market commodity exporter stocks another boost. Until the dust settles and the economic picture for the region stabilizes, investors may look for short-term opportunities to trade in and out, or hedge their emerging market 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 Boost S&P 500 VIX Short-Term Futures 2.25 x Leverage Daily ETP (VIXL) offers leveraged exposure to the benchmark VIX volatility index in Italy. The index measures the return from a daily rolling long position in the first and second month VIX futures contract. VIX, known as the ‘fear index’, reflects perceived volatility in the S&P 500 over the next 30 days, and is derived from the current pricing of options on the S&P 500 Index. As perceived volatility increases so the value of VIX increases.

The S&P 500 VIX Short-Term Futures Index is considered a useful tool for hedging against potential large and sudden drops in the US equity market. The Boost S&P 500 VIX Short-Term Futures 2.25x Leverage Daily ETP provides 2.25 times the daily performance of the index, also adjusted to reflect fees and costs inherent to maintaining and rolling a leveraged position in the futures, plus interest revenue earned on collateral. A total expense ratio of 0.99% applies.

Nossek said: “This years’ 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 volatility in the US equity markets. With a leveraged S&P 500 VIX futures ETP, investors can short term 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.”

Inverse and leveraged funds are often utilized by sophisticated traders to obtain tactical exposures and as such may present valuable insight into investor’s sentiment regarding the underlying asset. That being said, the funds contain significant risks for retail investors who may not fully understand the risks involved. These include the potential for considerable losses in volatile but range bound markets if the fund is held for an extended period.

Tags: , , , , , , , , , ,

Leave a Comment