BOOST Short & Leveraged ETFs/ETPs global flows report has revealed that $60 billion of AUM is held in S&L ETPs as at the end of June, which is down 1.7% from the end of May and up 3.5% from the end of December 2013.
Investors in S&L ETPs can express bullish as well as bearish sentiment by investing in either a leveraged or a short ETP. Thus the AUM of S&L ETPs can reveal a broader range of investor sentiment than flows or AUM data for mutual funds and other ETPs.
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Since S&L ETPs tend to be held for shorter periods and used more for tactical positioning, AUM and flows data for S&L ETPs can provide valuable insight into the market sentiment of a relatively sophisticated set of investors. The BOOST Short & Leveraged ETFs/ETPs Global Flows Report highlights the key flows and trends in S&L ETPs across asset classes and geographies.
In cutting their exposure across major equity markets, most notably in Japan, US and Europe, S&L investors repositioned bearishly in June. Bearishness was most pronounced in Japanese equities, where $780 million in long positions were redeemed.
Bearish repositioning by S&L investors also took hold over US equities and European country focused equity ETPs. Within US equity ETPs, $535 million redemptions in long ETPs accompanied $298 million creations in short ETPs. Within European equity markets, the inflows into short ETPs with a leverage factor of -2x coinciding with outflows from long ETPs with a leverage factor of +2x underscored S&L investors’ strong bearish conviction in Italy and Germany.
In contrast, the flows in UK and French equity ETPs were bullish. Having seen major bearish repositioning in May amidst lacklustre equity markets in France and the UK, S&L investors took a contrarian bet in equity markets there in June.
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By GlobalDataUS debt ETPs saw $1.3 billion of outflows from long positions, a marked reversal from the $1.9 billion of inflows in May. Upbeat producer and consumer sentiment indicators for the US, combined with the Fed’s confident tone in justifying the trimming of QE by another $10 billion per month may have driven S&L investors to cut their long positions.
The contrarian stance taken by S&L Investors in silver and natural gas underscored sentiment in commodities. The sharp fall in natural gas futures accompanied bullish repositioning in natural gas ETPs, while the marked rally in silver futures coincided with bearish repositioning in silver ETPs.
Despite these flows however, S&L investors remain predominantly bearishly allocated in natural gas (30% of AUM held as long positions) and bullishly allocated in silver ETPs (87% of AUM held as long positions).
S&L ETPs cover all major assets classes and geographies. In terms of asset allocation at the end of June, equity ETPs are the most popular with 69% of total AUM ($41.5 billion), followed by debt (18%, $10.9 billion) and commodities (7%, $4 billion). In equities, most of the AUM is focused on the US (US large cap, US small cap and US sector equities of $22.3 billion) and European equities ($6.2 billion).
In Europe, broad European indices excluding sector focused ETPs are the most popular ($2.5 billion in AUM), followed by Germany ($1.3 billion), Italy ($665 million) and France ($574 million). In debt, most of the AUM is in US government debt ($7.9 billion), German government debt ($1.1 billion) and European government debt ($224 million). In commodities, natural gas ($886 million of AUM), silver ($1 billion of AUM) oil ($984 million of AUM) and gold ($822 million of AUM) are the most popular.
