Inverse, Leveraged See Slight Decline in Assets

Assets under management for the world’s inverse and leveraged exchange traded funds declined slightly to $61 billion last month, a 0.8% decrease from April.

That $61 billion is still a 5% increase from December 2013, according to Boost ETP, which was recently acquired by WisdomTree (NasdaqGS: WETF), the fifth-largest U.S. ETF sponsor.

“49% 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 37% of AUM. 52% of AUM is held in long products with leverage factors ranging between +1.5x to +3x,” said Boost in a new research report.

Assets across short and leveraged ETFs are heavily concentrated in equity products, with those funds accounting for more than two-thirds of all global inverse and geared ETF assets. Short and leveraged bond funds account for 20% followed by commodities offerings at 6%, according to Boost.

Although U.S. stocks have recently been hitting record highs, investors have been pulling capital from long leveraged equity ETFs.

“Driving the outflows globally were the $3.2 billion redemptions in long positions of US equity ETPs, against $776 million creations in long positions. The resulting net $2.4 billion of bearish outflows from US equity ETPs were relatively large, representing 13% of US equity ETPs’ AUM at the end of April ,” said Boost.

That data point jibes with a rise in bearish wagers against broad market U.S. equity ETFs. Nearly 11% of the shares outstanding in the SPDR S&P 500 ETF (NYSEArca: SPY), the world’s largest ETF by assets, are sold short, “the highest proportion since 2012,” Bloomberg reported on Monday citing internal data and data from Markit Securities. [Bearish Bets Rising Alongside Equity ETFs]