Short & Leveraged ETFs/ETPs Global Flows Report by BOOST ETP
Data, Methodology and Terms Used
This report provides statistics of AUM, flows and related measures for short & leveraged ETFs/ETPs. Short & leveraged ETFs/ETPs are ETFs/ETPs whose leverage factor which respect to the underlying asset class is currently -1x or lower and +1.5x or higher. ETFs/ETPs which offer a non-leveraged exposure are not included in the analysis1.
Following are some definitions for the terms used in the analyses:
- ETF/ETP is used as a generic, interchangeable term to refer to ETF, ETP, ETN and ETC.
- AUM or Assets represents the assets under management in an ETF/ETP. For some ETFs/ETPs for which the AUM is not available, their market capitalisations have been used where possible.
- Asset Flow or Net Subscriptions, is a measure representing the value of net subscriptions over the period, thus removing the effect of changes due to price.
- Notional AUM is the sum of the AUM in each ETP multiplied by the absolute value of its leverage factor, e.g. $1 in a 3x long ETP or $1 in a -3x short ETP is $3 of Notional AUM in both cases.
- Notional Flow is the net subscriptions for each ETP multiplied by the absolute value of the leverage factor. Alternatively, it is the change in the Notional AUM that is not due to price changes.
- Net Position is the sum of the AUM in each ETP multiplied by its leverage factor (which may be either negative or positive). A negative figure indicates investors are net short.
- Net Position Flow or Repositioning is Notional Flow in long ETPs minus the Notional Flow in short ETPs. Alternatively, it is the change in the Net Position that is not due to price changes and indicates whether investors are bullish (net long) or bearish (net short) after taking leverage factor into account.
- Average Investor Leverage is calculated as the average leverage factor across all ETPs of a certain index / exposure and is weighted by the total AUM and leverage factor for each ETP. Average Investor Leverage is used as a proxy for overall investor sentiment with regard to an asset. It may be biased due to leverage factors on offer for each index / exposure3, and thus the change in Average Investor Leverage is the most relevant observation rather than the actual number.
All data provided in this report is sourced from calculations by Boost ETP, which are performed on underlying price, return, AUM, currency and market capitalisation data from Bloomberg®. Any fund description data is also obtained from Bloomberg. All data is as of 30th June 2015. All figures are denominated in USD.
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Global Assets Under Management
- The total global AUM of Short & Leveraged (S&L) ETPs at the end of June 2015 was $62.8 billion, up 2.0% from December 2014.
- 44% of AUM is held in short products with leverage factors ranging between -1x to -3x. 56% of AUM is held in long products with leverage factors ranging from +2 and above. The leverage factor with the most assets is +2x, with 36% of AUM.
- In terms of S&L asset allocation, equity ETPs are the most popular with 69% of AUM, followed by debt with 15% and commodities with 9%. The remainder is allocated between currency and alternative ETPs.
- The largest individual S&L ETPs are short US government debt and leveraged US equities.
Short & Leverage Equities: Global
- Currently there is $43.2 billion of AUM held in S&L equity ETPs, a decrease of 1.5% from December. 66% of equity ETPs globally are held in leveraged (long) ETPs, 34% in short ETPs.
- AUM in S&L US equity ETPs (including Size and Style but excluding Sectors as objective4) was $16 billion whilst US sector focused equity ETPs had $6.9 billion in AUM.
- There was $0.8 billion in inflows into S&L equity ETPs globally in June, a reversal in the large outflows seen earlier in the year. There was some evidence of investors repositioning bullishly, with long ETPs enjoying inflows of $1.5 billion at the expense of short ETPs, which suffered $0.7 billion in outflows.
- Driving the June net inflows of equity ETPs by geographic exposure was Japan with $474 million, followed by global with $273 million, and Europe with $167 million. By contrast, the US saw net outflows of $396 million.
Short & Leverage Equities: Europe
- Current AUM of S&L equity ETPs tracking Europe (including Size and Style but excluding Sectors as objective5) stands at $6.7 billion with $2.8 billion tracking the European region and $3.9 billion tracking individual European countries. The AUM of ETPs tracking European sectors (region and country specific) is only $63 million.
- European country-focused ETPs saw bullish repositioning by S&L investors in June, with $174 million outflows from short ETPs and $236 million inflows into long ETPs. This is likely a reflection on stronger growth prospects and improving sentiment within the Eurozone region, in spite of the uncertainty surrounding Greece. ETPs tracking French equities saw the largest inflows, followed by Germany and Russia.
- Positions taken by S&L investors on Europe as a region was similarly bullish, with $132 million flowing into long ETPs and $26 million flowing out of short ETPs.
- Since the start of 2015 cumulative inflows into S&L ETPs tracking broad Europe have reached $670 million.
Short & Leverage Debt: Global
- The AUM of S&L debt ETPs globally is currently $9.6 billion, up 13.5% from the end of December. With 97% of AUM held in short ETPs, S&L investors remain overwhelmingly bearishly positioned in debt.
- Breaking down the AUM of S&L debt ETPs, $8.5 billion is in government debt ETPs and $0.8 billion in corporate debt and preferred stock ETPs. The remaining $0.3 billion in AUM is held in a combination of government debt, corporate debt and alternative (sector focused) debt.
- $6.1 billion of S&L ETPs track US focused government debt, equivalent to 73% of global S&L debt ETPs. S&L ETPs tracking European government debt account for $2.0 billion in AUM, or 24% of global S&L debt ETPs, most of which is German government bonds. The remaining 3% of AUM in S&L ETPs track Asian debt (predominantly Japanese government bonds) and the Middle Eastern debt.
- In June, investors repositioned bearishly towards US Treasuries by selling $55 million of long ETPs whilst buying $166 million of short ETPs. This is likely in response to investors anticipating an interest rate hike by the Fed during the fall of 2015.
- Heightened uncertainty in Eurozone fixed income as a result of Greece has given S&L investors in European fixed income a cause for caution. Last month, S&L investors reduced their short positions as evident by the $130 million outflows from ETPs tracking German and Italian debt.
- Since July 2014 cumulative asset flows into S&L ETPs tracking German government debt reached $570 million, predominantly driven by the build-up of short positions.
Short & Leverage Commodities: Global
- S&L commodity ETPs are dominated by gold, silver, oil and natural gas, representing 95% of total AUM. Oil is currently the largest commodity ETP with $3.0 billion in AUM, followed by natural gas with $1.1 billion in AUM. Gold and silver are the 3rd and 4th largest commodity ETPs, with $693 million and $683 million in AUM, respectively.
- Up until April the AUM of S&L commodity ETPs had been rising on the back of the marked downtrend in crude oil which peaked at $6.035 billion.
- With volatile and sideways moving oil prices since February, S&L investors’ sentiment towards oil has lacked conviction. The $220 million in outflows from both long and short positions in ETPs tracking oil in June suggests that investors are struggling to form a clear view on near term path of oil prices.
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