LONDON, Feb 27 (Reuters) - Assets invested in leveraged and inverse exchange-traded funds (ETFs) and products (ETPs) hit a record $87.3 billion at the end of January, research and consultancy firm ETFGI said.
Investors have blamed such complex trading instruments for exacerbating the vicious sell-off in global equity markets at the beginning of February.
ETFs track baskets of stocks and have become popular due to their lower fees, but some have grown to include derivatives in their scope.
The ETFGI figures show such niche products have also been growing in popularity — over the course of January, leveraged and inverse ETFs and ETPs saw net inflows of $1.47 billion globally.
An inverse volatility ETF allows an investor to take a short position on VIX volatility futures, essentially a bet on volatility remaining muted, while a leveraged product can scale up the size of a bet.
During the February slide in markets, inverse and often leveraged ETFs based specifically on the VIX index magnified losses.
S&P 500 futures saw their biggest one-day spike on record at the beginning of February as MSCI’s All-Country index recorded its worst drop since the aftermath of Britain’s shock Brexit vote in June 2016.
The size of the global ETF and ETP market surpassed the $5 trillion mark at the end of January, according to ETFGI figures.
Reporting by Kit Rees Editing by Catherine Evans