Around six out of seven (85%) UK based wealth managers and IFAs say their clients have invested in financial instruments that provide leveraged exposure, according to new research from GraniteShares, a global issuer of Exchange Traded Products (ETPs) with more than $7 billion under management.
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Will Rhind, Founder and CEO at GraniteShares
- Nearly all wealth managers and IFAs are seeing an increase in interest from clients wanting to short stocks
- More than four out of five expect their clients’ use of leveraged single stock ETPs to increase over the next two years
Around two-thirds (66%) of them favour the use of certificates to leverage on long or short prices, while 31% say ETPs/ETFs are their clients’ preferred wrapper and 3% cite contract for difference (CFDs). Around one in 10 (9%) of wealth managers and IFAs say their clients have not previously invested in leveraged products but are considering it.
The study with 100 wealth managers and IFAs reveals 94% are seeing an increase in interest from clients wanting to short stocks. Of those, nearly half (46%) are aiming to generate a profit from tactical investing, compared to 14% who are looking to hedge an opposite position. Two out of five (40%) say their clients want to short stocks for both of these reasons.
The research from GraniteShares, the largest provider by AUM of leveraged single stock ETFs and ETPs, also highlights a lack of awareness among some wealth management clients regarding the range of leveraged products that are available to them. Some 54% of wealth managers and IFAs say more than half of their clients are aware that they can take leveraged positions on single stocks using liquid ETPs listed on major exchanges. However, nearly a quarter (24%) admit less than half of their client base know this and 15% believe only a few of their clients are aware. Just 7% say the majority of their clients are familiar with single stock ETPs.
There is a growing number of ETPs listing on the London Stock Exchange that provide leveraged exposure on single stocks like Barclays, BP, Shell and Amazon. More than half (54%) of wealth managers and IFAs say 4% of their clients have invested in such ETPs and 37% say 3% of their clients have traded these.
The table below shows the percentage of wealth management clients that have invested in leveraged single stock ETPs listed on the London Stock Exchange
| Percentage of clients that have traded leveraged single stock ETPs | Percentage of wealth managers and IFAs that selected this answer |
| 1% | 1% |
| 2% | 3% |
| 3% | 37% |
| 4% | 54% |
| 5% | 4% |
| 5% – 10% | 1% |
Moreover, 83% of wealth managers and IFAs expect their clients’ use of leveraged single stock ETPs to increase over the next two years, with 4% predicting a dramatic increase. Around 17% anticipate their clients’ use of such products will stay the same.
Will Rhind, Founder and CEO of GraniteShares, said: “Investors are increasingly looking to other means of boosting returns on investments and leverage is rapidly moving up the agenda for clients of IFAs and wealth managers.
“That is underlined by the growing awareness of products such as our leveraged ETPs, the most efficient wrappers to take leveraged exposures in an easy way, and the growing demand we are seeing from sophisticated investors.”
Source: ETFWorld.co.uk
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