ETF Short Selling Declines
June Data Reveals Broad Decline in ETF Short Interest, Indicating Potential Market Sentiment Shift
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Key Points
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Flow Traders U.S. LLC acquired a new position in Global Equity Active ETF (RGLO) in the 3rd quarter, purchasing 19,538 shares valued at about $556,000 and ending with roughly a 0.23% stake.
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SETM saw notable institutional moves: Evolution Wealth Management Inc. bought a new stake in SETM in Q1 valued at about $26,000, and NFSG Corp increased its holdings to 885 shares worth about $29,000 after purchasing an additional 775 shares.
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John Hancock Fundamental All Cap Core ETF (JHAC) is described as an actively managed, non-transparent fund that uses the Fidelity non-transparent model to select US companies across the entire market-cap spectrum via a bottom-up fundamental approach.
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Bushido Capital US Equity ETF (SMRI) is characterized as actively managed with an equally weighted portfolio of 30 to 50 US stocks chosen through a fundamental value approach.
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VictoryShares US Multi-Factor Minimum Volatility ETF (VSMV) saw a 735.1% jump in short interest to 2,906 shares, with roughly 0.1% of shares sold short and a days-to-cover of about 0.7 days; Goldman Sachs and other firms increased their stakes in VSMV (e.g., Goldman Sachs up 3,665.7% in Q4).
Short interest collapsed across several ETFs in June, with four out of five funds tracked showing sharp declines as of the June 15 settlement date. The most dramatic drop belonged to John Hancock Fundamental All Cap Core ETF (JHAC), where short interest fell 99.6% to just 7 shares — a near-zero level that signals almost no bearish activity whatsoever, according to Watchlist News.
Three other funds — Global Equity Active ETF (RGLO), Sprott Critical Materials ETF (SETM), and Bushido Capital US Equity ETF (SMRI) — each saw short interest drop between 80% and 83%. The one outlier was VictoryShares US Multi-Factor Minimum Volatility ETF (VSMV), which bucked the trend with a massive 735.1% surge in short interest to 2,906 shares.
JHAC and SMRI Post Near-Total Short Abandonment
JHAC's plunge to just 7 shares short is striking even by ETF standards. The fund is actively managed and non-transparent, meaning it does not disclose its holdings daily. It uses the Fidelity non-transparent model to pick US companies across all market sizes using a bottom-up, fundamental approach. That structure appears to have made it a poor target for short sellers.
SMRI also saw heavy short covering, with short interest falling 82.3% to 690 shares. The fund holds 30 to 50 US stocks chosen through a fundamental value approach and weights each position equally. The drop suggests traders who had bet against the fund have largely walked away from those positions.
RGLO and SETM Attract New Institutional Buyers as Shorts Exit
Global Equity Active ETF (RGLO) cut its short interest by 80.1% to 10,840 shares, with a days-to-cover ratio of just 0.3. That means it would take less than half a trading day to cover all existing short positions. At the same time, Flow Traders U.S. LLC stepped in as a new buyer, picking up 19,538 shares worth about $556,000 — ending with roughly a 0.23% stake in the fund.
SETM, which focuses on critical materials, saw an 81.4% drop in short interest as of June 15. Institutional buyers also moved in on this fund. Evolution Wealth Management Inc. bought a new stake worth about $26,000 in Q1. NFSG Corp added 775 shares, bringing its total to 885 shares worth roughly $29,000. Both moves point to growing confidence in the critical materials sector.
VSMV Spikes 735% as Investors Use It to Hedge Portfolios
While most funds saw shorts flee, VSMV moved sharply in the opposite direction. Short interest jumped 735.1% to 2,906 shares. About 0.1% of the fund's shares are now sold short, with a days-to-cover of roughly 0.7. Goldman Sachs had already increased its VSMV stake by 3,665.7% in a prior quarter, according to SEC filings.
The spike in VSMV short interest does not necessarily mean investors are bearish on the fund itself. Minimum volatility ETFs are often used as proxy hedges — a way to offset risk from large bets elsewhere in a portfolio. Investors overloaded on high-growth stocks may short a low-volatility fund to balance their exposure without selling their core holdings.
Broad Short-Covering Points to a Shift in Market Sentiment
Taken together, the June data reflects a broad retreat by short sellers from actively managed and fundamentals-driven ETFs. Four of the five funds tracked saw short interest drop by at least 80%. That kind of widespread short-covering often signals that bearish investors are giving up on their bets — either because the trade is not working or because the market outlook has improved.
The data arrives against a backdrop of shifting macro conditions, including recalibrated interest rate expectations and a broader rotation toward value-oriented investing. JHAC's near-zero short interest — just 7 shares — may also push other fund issuers to look at non-transparent active structures as a way to limit predatory short activity going forward.
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