Short and leveraged ETPs surpass $63bn in global AUM

Jul 8th, 2015 | By | Category: Alternatives / Multi-Asset

ETF STRATEGY NEWS! ETF Strategy is delighted to announce the launch of ETF Strategy Hub (hub.etfstrategy.com), an on-demand repository of webcasts, videos, podcasts and white papers. Debuting with Special Series on Technology & Innovation in China and the Digital Economy.


Short and leveraged (S&L) exchange-traded products (ETPs) continue to enjoy steady growth, with assets under management (AUM) recently exceeding $63bn worldwide, according to a report from Boost ETP.

Short and leveraged ETPs surpass $63bn in global AUM

Viktor Nossek, Head of Research at Boost ETP.

The total market for S&L ETPs has risen 2% since the start of the year, led by significant inflows to leveraged long equity products and products offering short fixed income exposure.

Today, S&L ETPs cover all major asset classes and geographies. As of the end of June 2015, asset allocations within S&L ETPs could be divided mainly into those tracking equities (69% or $43.2bn), debt (15% or $9.6bn) and commodities (9% or $5.8bn).

In terms of exposure, the majority of S&L ETP AUM is currently linked to US assets, which reflects both the global importance of US equity and fixed income markets, but also the size of the S&L ETP market in the US (and investors’ home bias) relative to other regions where the market for this kind of product is less mature. A breakdown of US exposures reveals that large and small-cap equity ETPs hold the most AUM, with $16bn in assets, follows by sector-specific ETPs ($6.9bn) and those tracking US Treasury bonds ($6.1bn).

The most popular European exposures for S&L ETPs are those tracking broad Continental and Pan-European equities ($2.8bn in AUM), followed by German ($1.5bn), Italian ($571m) and French ($515m) equity markets. In the European fixed income segment, products linked to German bunds harbour the largest amount of AUM ($1.4bn), followed by Italian BTPs ($308m) and European regional-focused fixed income ($300m).

Within the commodity space, S&P ETP AUM is dominated by products offering leveraged long and short exposure to oil ($3bn in AUM), followed by natural gas ($1.1bn), gold ($693m) and silver ($683m).

Although the market for S&L ETPs is small compared to the global ETF market, because these products are typically used for tactical trading and short-term hedging, movements in net flows can offer valuable insight into market sentiment.

S&L ETPs tracking debt instruments have gained in popularity this year, increasing global AUM by $980m. The trend has been an increase of net flows to products that take short positions on Treasury bonds, reflecting growing consensus that the Federal Reserve will indeed raise interest rates at some point this year.

Investors have also increased positions in short ETPs linked to German bunds due to the uncertainty surrounding the Greece crisis.

S&L commodity ETPs have recorded net outflows since the start of the year as the volatile, sideways movements in oil prices have deterred investors from placing leveraged bets on future moves.

Viktor Nossek, Director of Research at WisdomTree Europe, the parent company of Boost, commented: “June saw investors in short and leveraged ETPs reposition bullishly in equities and bearishly in bonds. A strong bullish conviction towards Japanese and European equity markets was evident in the building up of long positions and unwinding of short positions in ETPs tracking them. At the same time, S&L investors cut their US equity exposure by unwinding some of their long and short positions.”

Tags: , , , , , ,

Leave a Comment