Boost ETP

Boost ETP LLP.
Subsidiary
Industry Financial services
Founded 2012
Headquarters London, UK
Key people
 Ian 'Hector' McNeil
(CO-CEO), Nik Bienkowski
(CO-CEO)
Products Exchange-traded products
Exchange-trade commodities
Asset management
Parent WisdomTree Investments
Website Boostetp.com

Boost ETP is an independent boutique Exchange Traded Products (ETP) provider, based in London, United Kingdom. Boost ETP is the first asset management firm in Europe to offer 3x leveraged ETPs and 3x short ETPs.[1] The first Boost ETP products became available on 6 December 2012 on the London Stock Exchange.[2]

History & Motivation

Boost ETP LLP was set up by Ian 'Hector' McNeil and Nik Bienkowski, former Managing Partners of ETF Securities.[3][4][5] On 11 December 2012 McNeil and Bienkowski were invited to the London Stock Exchange to formally open the London markets in order to mark the launch of 20 new ETPs offered by Boost ETP.[6]

Leveraged ETFs / ETPs have been part of the investment scene in North America since ProShares introduced "Ultra ProShares"[7] in 2006 and have since grown rapidly.[8] Even though this was preceded by the introduction of the world's first leveraged ETFs in Sweden in 2005 by XACT[9] the European market remained underdeveloped. The ETF market in Europe is generally seen to be five to ten years behind the American market,[10] a theory that appears to be consistent with leveraged ETPs. Due to the offerings of companies like PowerShares and Direxion the US ETF market has a range of 3x leveraged and inverse ETFs, this is not the case in Europe. Having spotted an opportunity to create niche value Boost ETP was set up in order to satisfy European demand for 3x leveraged and short ETPs.[11]

In 2014, WisdomTree Investments acquired a majority stake (75%) in Boost ETP. WisdomTree will invest $20 million in Boost ETP to give it working capital to build out its European business.[12]

Product Structure

Boost ETP's swap-based model incorporates features from both "unfunded" and "funded" swap operating models. When Boost ETP issues a product to an investor the capital received is transferred to the swap counterparty. However, as the products are three times leveraged the counterparty is offering 3 times the exposure whilst only receiving one third of the value of the swap, meaning that the swap is both funded and unfunded.

Traditionally speaking ETFs are broken into two categories:

Types of swaps:

Key Partners

Authorized Participants

Boost ETP's partners are some of the largest participants in the Exchange Traded Products market. BNP Paribas, Virtu Financial, Flow Traders, ABN Amro and UBS act as Authorized Participants for its London Stock Exchange-listed range.[17]

Market Makers

Boost ETP has a variety of Market Makers[18]

Leveraged Exchange Traded Products / Exchange Traded Funds

Leveraged Exchange Traded Products (ETPs) are a specific type of ETP/ETF that aim to achieve returns that are more sensitive to market movements than standard ETPs/ETFs.
In a similar fashion to vanilla exchange traded products investors that take on leveraged ETPs/ETFs expose themselves to the performance of an underlying asset. However, unlike a standard ETP/ETF, a leveraged product will return a multiple of the return of the underlying asset to the investor. Common leverage factors are 2x, 3x and 5x meaning that the product will return 200%, 300% or 500% of the daily performance of the underlying asset.[19]

Leveraged ETFs / ETPs

Leveraged ETFs / ETPs are generally split into two categories:

These ETPs will result in a direct multiple of the return of an underlying asset. Therefore, a 3x leveraged ETP tracking the FTSE 100 will amplify the daily return of the underlying index by a multiple of 3. If the underlying index returns 1% the ETP will return 3%, if the underlying index returns -1% the ETP will return -3%.[20]

Conversely, a 3x short ETP will return three times the inverse of the index it is tracking. If the underlying index returns 1% the ETP will return -3%, if the underlying index returns -1% the ETP will return 3%. The fact that the value of inverse ETPs rises during a declining market environment makes these investments very popular in bear markets.[21]

Rebalancing method

Most leveraged ETPs employ a method of daily rebalancing in order to deliver the correct multiple of index returns on that day. This can result in beta slippage whereby the movements in the underlying index can affect the overall value of the ETP by a disproportionate amount.[22]

See also: Leveraged ETFs

Boost ETP Products

Equity linked ETPs:

Commodity linked ETPs:

Awards

In its first year of existence Boost ETP won the ETF Express "Most Innovative European ETP Provider" for 2013.[23]

Issuers of ETFs

List of Exchange Traded Fund issuers.

References

  1. ↑ http://www.boostetp.com/Content/About-Us
  2. ↑ http://www.mondovisione.com/media-and-resources/news/boost-etp-launches-on-london-stock-exchange-issuer-debuts-with-ftse-based-leve/
  3. ↑ http://www.efinancialnews.com/story/2013-04-02/mcneil-and-bienkowski-offer-etp-boost
  4. ↑ http://www.indexuniverse.eu/europe/news/8648-specialised-provider-hits-european-etp-market.html
  5. ↑ http://www.indexuniverse.com/sections/features/15409-boosting-the-etp-market.html
  6. ↑ http://www.londonstockexchange.com/about-the-exchange/media-relations/press-releases/2012/boostetplaunchesonlondonstockexchange.htm
  7. ↑ http://www.investopedia.com/articles/mutualfund/07/leveraged_etfs.asp
  8. ↑ http://seekingalpha.com/article/850221-the-38-million-dollar-levered-etf-share
  9. ↑ http://en.xact.se/Our-ETFs/Leveraged/XACT-Bull/#tab=facts
  10. ↑ http://www.ey.com/Publication/vwLUAssets/European-ETF-survey-2013/$FILE/European_ETF_survey_2013.pdf
  11. ↑ http://www.etf-radar.com/blog/2013/03/experttalk-hector-mcneil/
  12. ↑ Hampson, Rebecca. "WisdomTree Taps Into Europe With Purchase". ETF.com.
  13. ↑ http://www.recognia.com/news/investor-education/online-brokers-can-teach-clients-about-etfs-vs-etns
  14. ↑ http://www.etf.db.com/UK/EN/binaer_view.asp?BinaerNr=1224
  15. ↑ http://www.morningstar.co.uk/uk/etfs/etfsolutions.aspx?docid=324200
  16. ↑ http://www.indexuniverse.eu/europe/opinion-and-analysis/7862-synthetic-etf-boom-slows.html
  17. ↑ http://www.etfstrategy.co.uk/boost-etp-source-sign-up-additional-etf-authorised-participants-aps-44723/
  18. ↑ http://www.boostetp.com/Content/MMs-APs
  19. ↑ http://www.advisorone.com/2013/04/01/tactical-trading-with-long-short-etps
  20. ↑ http://www.marketwatch.com/story/profunds-readies-first-leveraged-etfs
  21. ↑ http://articles.marketwatch.com/2012-06-04/investing/32008436_1_stock-market-elder-market-mutual-fund
  22. ↑ http://www.investopedia.com/articles/exchangetradedfunds/07/leveraged-etf.asp
  23. ↑ http://www.etfexpress.com/2013/03/26/182154/etfexpress-global-awards-2013-winners