UBS, the Swiss investment bank behind the U.S.-listed “Etracs” exchange-traded fund franchise, yesterday completed the shuttering of seven ETNs, including five relatively granular and gimmicky strategies like cloud computing that are focused on the world of information technology. All the ETNs gathered few assets.
Six of the seven were at risk of closure in the ETF evaluation system created by IndexUniverse’s ETF analytics unit—the one exception being an ETN built around an index of companies focused on cloud computing that had almost $17 million, which had medium closure risk.
The closings are emblematic of what appears to be the end of a period of exchange-traded product development characterized by the launch of rather tightly focused products that, in many ways, are at loggerheads with the basic tenets of index investing, which hold that broadly focused securities are the best way to achieve the most consistent risk-adjusted returns over time.
ETF and ETN closures this year now total 39 funds —a healthy clip relative to most years in the industry’s 20-year history, but well off last year’s pace that led to more than 100 strategies shutting down. Industry sources say ETF and ETN closures are a sign of a maturing industry, and that pruning unsuccessful strategies sets up the exchange-traded product industry for smoother long-term growth.
The last trading day for the seven ETNs that UBS is shuttering was Wednesday, June 5, and all open orders on the securities as of the open on June 6 will be canceled, according to a communique from the New York Stock Exchange where the ETNs are listed. The ETNs and their assets as of Tuesday, June 4 are as follows:
- Etracs Monthly 2x Leveraged ISE Cloud Computing TR Index ETN due October 4, 2041 (LSKY), $16.72 million.
- Etracs Next Generation Internet ETN due July 19, 2041 (EIPO), $7.1 million
- Etracs Monthly 2x Leveraged Next Generation Internet ETN due July 19, 2041 (EIPL), $3.83 million
- Etracs ISE Solid State Drive Index ETN due September 13, 2041 (SSDD), $11.11 million
- Etracs Monthly 2x Leveraged ISE Solid State Drive Index ETN due September 13, 2041 (SSDL) $9.86 million
- Exchange-Traded Access Securities (Etracs) Short Platinum - Linked to the Inverse Performance of the UBS Bloomberg CMCI Platinum Excess Return due 2018 (PTD), $3.49 million
- Etracs DJ-UBS Commodity 2-4-6 Blended Futures ETN (BLND), $9.38 million
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