Alex Vynokur

While Australian equities are trading near six year highs, trading volumes in BetaShares exchange traded products (ETPs) reveal that a growing group of investors are positioning their portfolios for a potential pullback in the market.

According to BetaShares’ data, the average daily value traded of BetaShares Australian Equities Bear Hedge Fund(ASX Code “BEAR”) has increased by 40% in the last month. The BEAR fund trades on the ASX and is designed to go up when the market declines, and vice versa.

Alex Vynokur, Managing Director of BetaShares said the increased trading in BEAR appears to indicate that sentiment may be turning more cautious in certain pockets of the Australian investor community.

“Currently, we are seeing great interest in the BEAR fund, which seems to reveal an undercurrent of nervousness in the domestic equities market following the federal budget announcement and its impact on consumer confidence”, Mr Vynokur said. “In addition, we have had a continual stream of mixed data from key economies such as the United States, Europe and China which is causing investors to consider protecting their portfolios from downside risk.”

Commenting on the broader take up of ETPs in Australia, Mr Vynokur concluded: “It’s encouraging to see investors taking positions across different asset classes, an indication of a maturing user base in exchange traded products. The Australian ETP landscape has broadened significantly over the past few years, providing investors with convenient and cost effective access to a range of asset classes, and allowing more opportunities to generate returns in every market condition.”

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The BEAR Fund will trade under the ASX Code “BEAR” and seeks to generate returns that are negatively correlated with the movements in the S&P/ASX 200 Index. More simply, the BEAR Fund is expected to go up when the Australian share market goes down.

The fund employs a simple structure, investing all of its assets in cash and cash equivalents and obtaining short exposure via futures contracts (ASX SPI 200 futures).

In addition, the fund will be quoted on the ASX, which provides investors with the ability to buy and sell units during the course of the trading day, just like any share. To mark the occasion of the launch of the BEAR Fund, BetaShares “opened the market” by ringing the bell at the ASX on Tuesday.

12 July 2012

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