ETP Provider Launches Toolkit For Investors Nervous Over Leveraged, Bearish Products

Tom Burroughes

31 May 2013

An educational “toolkit” for investors concerned about risks of leveraged exchange-traded products or ETPs giving exposure to bearish, or “short” bets on markets has been launched by BOOST ETP, a provider of such fund products.

Global short and leveraged ETP assets have risen to $48.5 billion in size of assets under management, out of a global ETP market worth over $2 trillion, BOOST ETP said in a statement.

Its “Short & Leveraged ETF/ETP Advisor Tool Kit” has been rolled out, the UK firm said, in response to concerns by global regulators over the use of leverage by investors, an issue made more urgent since the fallout of the 2008 financial market crash.

Leveraged ETPs, according to one definition, use financial derivatives and debt to amplify the returns of an underlying index and are available for most indexes, such as the FTSE 100 and the Dow Jones Industrial Average. These funds aim to keep a constant amount of leverage during the investment time frame, such as a 2:1 or 3:1 ratio. Short ETPs, meanwhile, are designed to generate positive returns for investors in a bear market.

Such products have concerned European organisations such as the European Securities and Markets Authority which are worried that investors, hungry for returns in the current low-yield environment, might embrace risky products they don’t understand, leading to big losses they can ill afford to lose.

BOOST, which has a short and leverage ETP platform which it says is designed to forestall such problems, says education and transparency on such products is vital.

The “tool kit” includes fact sheets explaining short and leveraged returns and compounding; a short and leveraged return simulator, in the form of a downloadable Excel file; presentations, conference calls and seminars on how to use short and leveraged ETFs/ETPs, some of which have been accredited for Continuous Professional Development; and trade ideas on how to use short and leveraged ETFs/ETPs.

“It’s clear that there is demand for short and leveraged products given the growth in these types of ETPs, and the wide use of other types of short and leveraged products," said Nik Bienkowski, co-CEO of BOOST ETP.

“Strategies previously not available in ETP format, such as short and leverage, or commodities, will slowly make their way into the ETP format. With the current market environment, such as RDR and a move to exchange-traded products, we expect an increase in the use of ETPs, and BOOST ETP along with its short and Leveraged ETF/ETP Advisor Tool Kit, is perfectly positioned to participate in this increased demand.”