Core Insights - Short and leveraged ETFs are increasingly being utilized as risk management tools by sophisticated investors, moving beyond their traditional role as speculative instruments [1][4][6] Group 1: Academic Findings - A recent study indicates that high levels of shorting in US broad market ETFs are often followed by positive index performance, suggesting a hedging strategy rather than speculative betting [2][3] - The relationship between short interest and market performance contradicts previous assumptions that higher short interest leads to lower future returns [3] Group 2: Market Trends - Short and leveraged ETFs currently manage approximately $147 billion in assets globally, nearly double the amount from 2017, indicating significant growth in this sector [6] - The perception of these products is evolving, with experienced investors increasingly using them for dynamic risk management rather than purely for speculation [6][7] Group 3: Use Cases - Retail clients are using inverse ETFs to reduce exposure to high-valued US equities without incurring tax liabilities, allowing them to hedge without selling assets [4][5] - Market makers are leveraging these ETFs as efficient tools for hedging trading positions, providing a streamlined method to manage their hedge books [5] Group 4: Investor Demographics - Over half of the assets in short and leveraged ETFs are held by institutional investors, which challenges the notion that these products are primarily for retail investors [7] - In Europe, while the market is smaller, there are signs of increasing interest from professional investors in using these products for portfolio risk management [8]