The Energy equity sector, presumably predicated on the magnitude of recent volatility in spot Energy commodity prices notably Oil, continues to trade with great interest even as we have seen largely lethargic action in other S&P industry sectors.
Case in point is XLE (SPDR Energy Select Sector, Expense Ratio 0.16%) which continues to see activity in its listed options (the trend has been primarily at or out-of-the-money put buyers), and the fund has seen about $300 million flow out recently via redemption activity despite the recent bounce in price.
Likewise, related ETF OIH (Market Vectors Oil Services, Expense Ratio 0.35%) has experienced outflows greater than $400 million in recent days, so it is clear that portfolio managers continue to migrate away from the sector at least in the short term.
Crude Oil, the commodity itself continues to be under pressure, and trading volume in the largest (for now) ETF that tracks Crude Oil prices, USO (United States Oil Fund, 0.45%) is currently at or near all-time product highs since inception, and most importantly, on consecutive trading days.
However, the bad news for USO is that its long reign as the largest Oil linked ETP in the U.S. listed marketplace is in jeopardy given recent redemption activity and amid a trend of lower lows in the ETF. USO’s assets under management dipped below the $400 million mark recently for the first time in recent recollection (the fund was launched in 2006) and nipping at its heels in terms of AUM if not overtaking it in the space is a ProShares
leveraged product, UCO (ProShares Ultra Bloomberg Crude Oil, Expense Ratio 0.95%) which is approximately at the $400 million mark in terms of its net AUM thanks to notable growth in 2014 via creations.
However, it should be noted that since this product is designed to provide two times the daily leveraged exposure to the Dow Jones-UBS Crude Oil Sub-Index (a futures based index), that assets can appear and disappear in the fund in large chunks at a time given volatility swings and traders potentially reaching their objectives.
Other Crude Oil ETPs will likely get more attention now given the trading volume swells in USO but trend of net redemptions, as asset managers that are looking to enter the commodity on recent weakness if not swap from USO into other smaller (but newer alternatives in the Crude Oil ETP space) include the following: DBO (PowerShares DB Oil Fund, Expense Ratio 0.75%, $258 million in AUM), OIL (iPath S&P GSCI Crude Oil Total Return ETN, Expense Ratio 0.75%, $236 million in AUM) among others.
ProShares Ultra Bloomberg Crude Oil ETF
For more information on Street One ETF research and ETF trade execution/liquidity services, contact Paul Weisbruch at pweisbruch@streetonefinancial.com
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