VelocityShares Replacing Delisted Oil ETNs With Similar Products
In a rather stunning last-minute development, as the VelocityShares triple-leveraged oil ETNs neared their delisting at the close of business on Thursday, Citigroup announced this afternoon that it would be launching a pair of VelocityShares-branded exchange-traded notes that are structured almost exactly the same way. They even have the same names and similar tickers.
The VelocityShares 3x Long Crude Oil ETN (UWT) and the VelocityShares 3x Inverse Crude Oil ETN (DWT) will launch Friday morning, seamlessly filling the void left by the delisting of the VelocityShares 3x Long Crude Oil ETN (UWTI) and the VelocityShares 3x Inverse Crude Oil ETN (DWTI), which still have hundreds of millions of dollars in assets.
The two new Citigroup-backed ETNs will have expense ratios of 1.50%, while the outgoing Credit Suisse products had expense ratios of 1.35%.
"We’ve been seeing fees compressing on ETFs. But because this product is going to fill a newly created gap, [CitiGroup] may have success in charging more because a lot of money needs to go somewhere,” said Todd Rosenbluth, director of ETF and mutual fund research at independent research firm CFRA, with regard to the higher price point on the new ETNs.
Completely New Products
It should be emphasized that these are entirely new and separate products and there will be no ability to convert the ETNs delisting today into the new ones that will list tomorrow.
However, investors looking to achieve similar coverage will have the ability to do so going forward, albeit at a higher management fee. Investors still holding shares of UWTI and DWTI will still need to figure out their exit strategy.
Heather Bell can be reached at hbell@etf.com.
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