(August 1, 2012) — Investors are piling assets into passive investment vehicles that are designed to make money when markets decline, research from data monitor Markit has shown.
A positive net inflow so far this year to the 417 Exchange Traded Products (ETPS) classified as short or inverse by the Markit ETF Encyclopaedia has resulted in a $1.5 billion increase in their capital base, the company said.
These inverse funds have $24 billion of assets under management which represents 1.5% of the $1.5 trillion held in global ETFs. However, investors clearly believe only some parts of the market are in line for continued decline.
Markit said: “Two asset classes have seen a net increase in funds managed. Fixed income funds have seen net fund inflows of $1.1 billion. Equity ETFs saw the largest increase in funds managed with a $1.3 billion of net inflows taking their aggregate assets under management to $15.2 billion. Overall equity ETFs are the most popular with investors, attracting $15 billion of the $24 billion of assets invested in inverse ETFs.”
Year to date, the MSCI World Index is up 5.75%, but the geographical split tells a different story. The MSCI Europe index is up 0.91% year to date, but down 15.58% over a one-year period. The MSCI US index is up 9.58% year to date and 6.26% on one-year basis.
However, almost all indices are down over the past three months, and as economic woes lie heavy around the world, this trend could continue for some time. Markit said inverse ETFs had seen inflows across all geographical regions – save South Korea, which has also seen stock market declines.
“Of the equity short ETFs, North American funds dominate the assets under management with two thirds of the total funds, followed by European short funds and globally exposed funds which respectively have $3.3 billion and $924 million under management,” Markit said. “European exposed funds saw the largest inflows with $689 million followed by North America which saw $643 million of net inflows.”
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