Logistical difficulties associated with shorting traditional bond products and shorting within emerging markets have made borrowing ETFs an attractive alternative for investors, despite higher fees to borrow than other securities.

“Fees generated through lending out ETF assets have generally held up despite the fact that the available pool of ETF assets to borrow from stands at an all-time high. Currently, return to lendable of US listed ETFs is five times higher than equities in the same market,” said Andrew Laird, analyst at Markit.

Of the 20 US ETFs with the highest indicative fees to borrow, six are bond ETFs several offer exposure to emerging markets, according to the report. Indicative fees for these funds range from 6% to 10%, with the highest fees to borrow for the Vanguards intermediate term corporate bond ETF and the Wisdomtree international hedged equity fund ETF.

Bond ETF’s can be used as channels to circumvent logistical issues and allow investors to take a view on rising interest rates that are at historic lows.

ETFs have also become an alternative means to get short exposure to countries that have restrictions on short selling of equities or don’t have mature securities lending markets.

This phenomenon will grow in the coming years as many of the 833 and growing non-US ETFs that trade in the US offer an increasingly diverse set of products, according to Markit.

“Paying 7% a year to borrow an Indonesian basket in a relatively liquid market starts to make sense when looking at the logistics needed to borrow the constituents in the domestic market whose borrow fees often do not match that of the ETF,” said Laird.

The majority (73%) of US ETFs that Markit covers have a fee greater than 150bps, although they rarely rise above 25%.

Rates have remained consistently high for the Proshares ultra vix short-term futures ETF for the past two years and currently stand at 8%. The ETF has been a particularly profitable trade for shorts having had an “abysmal” price performance ranging from -69% to -5% in the three years up to Q2 2014.

Despite high fees, ETF borrowing has boomed over the past decade. The total value on loan for US exchange traded products (ETPs) has risen to $48bn, up from $30bn in April 2012. The value amount covers 1900 products in total.