Short & leverage ETP AUM finishes year up 13.8%

Feb 9th, 2016 | By | Category: Alternatives / Multi-Asset

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Global assets under management invested in short & leveraged (S&L) exchange-traded products (ETPs) finished the year up 13.8% at $68.3 billion, according to data from London-based S&L ETP provider Boost ETP. The strong performance was largely driven by increasing numbers of investors deploying the products to capitalise on shirt-term market volatility or temporarily hedge long-term portfolio positions.

S&L ETPs saw their AUM increase by 13.8% globally to $68bn during 2015.

S&L ETPs saw their AUM increase by 13.8% globally to $68bn during 2015.

Investors in S&L ETPs can express bullish as well as bearish sentiment by investing in either a leveraged or a short ETP respectively. As of year-end, 43% of AUM was held in short products with leverage factors ranging between -1x to -3x, while  57% of AUM was held in long products with leverage factors ranging from +2 and above.

Nick Leung, Research Analyst at WisdomTree Europe, the parent company of Boost ETP, commented: “December capped a record year for short & leveraged ETPs as investors took advantage of persistent volatility to position opportunistically or hedge their exposures.”

“The build-up of bearish sentiment on fixed income, following the much anticipated first Fed rate hike since 2006, was cut short by China’s slowdown fears amidst falling industrial confidence pressuring the RMB.  This triggered redemptions of $260m on short ETPs tracking US debt, accelerating the unwinding of short positions that had built up in the first half of 2015. At the same time, investors in S&L equity ETPs responded to the Fed rate hike by repositioning bullishly in US and European equities, as evident by contrasting flows in long and short ETPs.

“Flows into Japanese equities continued to strengthen but the positioning was mixed, with an additional $870m flowing into both long and short positions in equal measure last month. 2015 inflows into S&L ETPs tracking Japanese equities now stand at over $5.2bn.

“S&L commodity ETPs also enjoyed substantial inflows of $710m in December, underpinned by contrarian bets in response to the RMB devaluation raising geopolitical tensions in Asia.”

Equity ETPs remained the most popular asset class among S&L ETPs with a global AUM of $49.8bn or 72% of total S&L AUM. This represents a 16% increase in AUM over the past 12 months. Equity ETPs with long leveraged exposure accounted for 69% of equity S&L ETPs while short equity ETPs made up 31%.

Fixed income ETPs accounted for 12% of total S&L ETPs, or roughly $8bn in AUM. Investors remained overwhelmingly bearish with over 96% of assets assigned to short exposures. There was a 70% allocation to ETPs tracking US Treasuries, 26% to European government debt, and 4% to Asian government debt.

AUM of S&L commodity ETPs reached $6bn in December, representing 9% of the total S&L ETP market. The most popular commodities to adopt tactical positions with as of the end of December were oil ($3.6bn AUM), natural gas ($739m), gold ($696m), and silver ($539m).

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