Investors pile $200m into ETF Securities’ Currency platform as European debt crisis continues

ETF Securities’ Currency ETC platform sees AUM increase by 530% YTD, bringing AUM to $200 million….

• ETFS Short AUD Long USD (SAD) receives $65m of inflows over the past month as SAD rises 14% in May
• Short EUR and short GBP also popular trades in May as investors look to profit from European debt crisis
• 84% of investors currently short G10 currencies vs. USD, with USD strengthening 16% since the inception of Currency ETC platform in November 2009
• Average monthly trading volume surges over 900% YTD as investors increase use of Currency ETCs as currency volatility rises 31% in the past month

London, 26/05/2010 – ETF Securities (ETFS), which launched the world’s largest and Europe’s first platform of Exchange Traded Currencies (Currency ETCs), has seen assets in the Currency ETC platform increase by 530% this year. Total AUM reached $200m having only been launched on 12 November 2009. We believe this growth in the Currency ETCs further exemplifies investors’ acceptance of ETF Securities’ collateralised ETC structure as a safe, easy and efficient way to invest in the FX market. ETFS Short AUD Long USD (SAD) is currently the largest Currency ETC with $67 million in AUM, having taken $65m of inflows in the past month. SAD is up 14% thus far in May as the market has begun to consider whether there will be a pause in Australia’s rate hike cycle along with the potential effects on the local economy of the new mining profits tax.

ETFS Short EUR Long USD (SEUR) with $39 million AUM, and ETFS Short GBP Long USD (SGBP) with $16 million AUM, have also been popular, having captured around $20m of AUM in the past week as concerns over the European debt crisis have continued. SEUR is up 22.6% since the start of December 2009 and up 8.8% in May while SGBP is up 15.0% since the start of December 2009 and up 6.7% in May.

As the average one-month G10 currency volatility increased 31% (as of 25th May 2010), trading volumes in Currency ETCs have surged over 900% this year. ETCs have been designed to be liquid and simple instruments. As a result, Commodity ETCs (structured in a similar way to Currency ETCs) have seen their volumes increase from around $500m per week to around $2 billion per week in the past 2 years. Last week, Currency ETCs traded around $70m.

Martin Arnold, Senior Analyst, ETF Securities, commented:

“The Aussie dollar has come under pressure in recent weeks as a result of rising expectations of a pause in the rate hike cycle, and the potentially adverse impact from the government’s newly proposed mining tax. Accordingly, our investors have implemented their increasingly bearish views regarding the Aussie dollar using ETFS Short AUD Long USD (SAD), with SAD’s assets rising from $2 million to $67 million in the past four weeks.

But it has not been just the Aussie dollar under pressure as the European debt crisis rages on, with the latest concerns being fueled by weakness in the Spanish banking sector. Investors have also been taking views on the UK’s ability to extricate itself from its own debt problems. The nascent UK Coalition government has much work to do convincing investors about its ability to introduce effective policy. ETFS Short GBP Long USD (SGBP) has been the way investors are expressing their doubts about the potential effectiveness of the Coalition government.”

Currency ETCs which were Short G-10 currencies versus USD performed best as the USD strengthened 16% versus the DXY Dollar Index. The table below shows the best performing Currency ETCs since inception on 12th November 2009 and the top 5 Currency ETCs by assets.

Source: ETF Securities, Bloomberg, ¹ ETFS Currency ETC returns from 12/11/2009 to 25/05/2010, ² share of Currency platform AUM as of 25/05/2010

Currency ETCs provide long or short passive exposure to G10 currencies versus the US Dollar and include AUD, CAD, CHF, EUR, GBP, JPY, NOK, NZK and SEK, and G10 currencies versus the Euro including GBP, CHF, NOK, SEK and JPY. The Currency ETCs also provide exposure to local interest rates in addition to FX movements. For example the implied interest rate incorporated into the MSFX Long Australian Dollar IndexSM is approximately 4.6% p.a. (Source: ETF Securities as of 25rd May 2010).

Source: ETFWorld – ETFSecurities