Still just a small slice of the $2.16 trillion in assets under management across global exchange traded products, global inverse and leveraged ETFs saw their AUM total rise $1.7 billion, or 3.5%, to $50.9 billion at the end of June, according to Boost ETP. Boost is a boutique firm specializing in trading triple-leveraged ETFs listed in Europe.
Year-to-date, “global S&L ETF/ETP AUM is up $6.8 billion or 15%” and “57% of AUM is held in short products with leverage factors ranging between -1x to -3x. However the leverage factor with the most assets is +2x, with 33% of AUM. 43% of AUM is held in long products with leverage factors ranging between +1.5x to +3x,” according to Boost.
While leveraged ETFs have a reputation for diverging significantly from the indexes they are designed and a penchant for being reverse split, the products have found favor with investors looking to capture out-sized gains in short time frames. [Investors Still Like Leveraged ETFs]
Last month, a U.S. appeals court has rejected a lawsuit alleging leveraged ETF provider ProShares failed to adequately disclose the funds’ risks. ProShares is the largest U.S. issuer of leveraged and inverse funds and the sixth-largest U.S. ETF sponsor overall with $25.3 billion in AUM. Rival Direxion has almost $6.4 billion in AUM. [Court Rejects Suit Against ProShares]
“From January to May there was a decline in long equity positions and an increase in short equity positions. June saw a reversal of that trend with inflows of $4.1 billion into long equity ETFs/ETPs and outflows of $609 million from short equity ETFs/ETPs equal to $10.1 billion net long notional flows in June (after taking leverage factor into account),” said Boost.
Boost said $163 million was pulled from global bearish commodities ETFs in June while $1 billion was pulled from long, leveraged bets on U.S. government bonds, outflows that coincide with rising yields on 10-year Treasurys.
Popular U.S.-listed leveraged ETFs include the ProShares UltraShort 20+ Year Treasury (NYSE: TBT), the ProShares UltraPro Short QQQ (NasdaqGS: SQQQ) and the Direxion Daily Financial Bear 3X Shares (NYSEArca: FAZ).
Direxion Daily Financial Bear 3X Shares
ETF Trends editorial team contributed to this article.