Citadel Securities: Systematic Funds Prepare to Re-Leverage and Buy Stocks

According to Odaily, Scott Rubner, head of stock and derivatives strategy at Citadel Securities, stated that the equity de-leveraging cycle has largely been completed. As volatility declines, the room for systematic strategies to re-establish equity exposure is expanding. Market breadth is improving, correlations are near historical lows, and investors are increasingly willing to pay a premium for upside potential. The next meaningful wave of mechanical capital flows is likely to be re-leveraging rather than continued de-leveraging.

Citadel Securities data shows that assets under management in leveraged ETFs have fallen from $218 billion at the end of June to $154 billion in July, a decline of nearly 42%, with semiconductor leveraged ETF assets at approximately $31 billion. Other Wall Street institutions have observed similar trends. Meanwhile, Morgan Stanley's Prime Brokerage team noted that after record de-leveraging in late July, funds began restoring capital and re-buying global stocks last week. (Bloomberg)