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]
The UltraShort S&P500 ProShares (NYSEArca: SDS) a double-leveraged, inverse play against the S&P 500, and the ProShares UltraPro Short QQQ (NasdaqGS: SQQQ) have seen solid inflows during the current quarter.
The Direxion Daily Small Cap Bear 3X Shares (NYSEArca: TZA), SDS and the Direxion Daily Gold Miners Bull 3X Shares (NYSEArca: NUGT) and SQQQ are the top-four asset gatherers among U.S. leveraged ETFs over the past month, according to Boost data.
The ProShares UltraShort 20+ Year Treasury (NYSEArca: TBT) is the largest U.S. leveraged ETF, according to Boost. TBT had $4.34 bilionin assets under management at the end of the first quarter, according to ProShares data.
Global Inverse and Leveraged ETFs
Chart Courtesy: Boost ETP
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.