Barclays Clones Its Own Inverse VIX ETN

January 21, 2011 by  
Filed under Commentary, ETF IPOs (New ETFs), ETNs, Volatility Products

Barclays launched the first inverse VIX futures ETN on July 19, 2010, dubbed the Barclays ETN+ Inverse S&P 500 VIX Short-Term Futures ETN (XXV).  I criticized their decision to abandon the iPath brand name for XXV.  Two months later, on September 28, Barclays corrected its mistake and renamed it the iPath Inverse S&P 500 VIX Short-Term Futures ETN (XXV).

Last week (1/14/11), Barclays launched a “new” product called iPath Inverse January 2021 S&P 500 VIX Short-Term Futures ETN (IVO).  My first reaction to this announcement was that they already had an inverse VIX short-term ETN with a ticker symbol of XXV.  I read the description in an attempt to find out what was different about the new product.  What I found was a 117-word description on the IVO overview page that is the same identical 117-word description used for XXV.

Barclays has one-upped themselves by becoming the first ETN sponsor to clone one of its own products.  I couldn’t make this stuff up if I tried. 

Next, I turned to the press release (pdf) in hopes of learning what made IVO new and different.  Instead, the press release confirmed my suspicion:  the two products are linked to the same index and returns are calculated in a similar manner.  I kept reading and finally found the “official” answer:

“…they have, among other things, different inception dates, issue dates, initial valuation dates, final valuation dates and maturity dates…”

My reaction to that is – So what?  Does Barclays really believe that people buy these things with the intent of holding them to maturity?  Does the 2021 maturity date of IVO versus the 2020 maturity of XXV make a difference to anyone in 2011?

Although they have different ticker symbols, both XXV and IVO have the same 0.89% expense ratio, the same credit risk from the same issuer, the same index and objective, and should have the same performance.  Learn more from the IVO fact sheet (pdf).  Until XXV matures in 2020, the largest difference between the two will likely be trading liquidity.

Disclosure covering writer, editor, and publisher:  No positions in any of the securities mentioned.  No positions in any of the companies or ETF sponsors mentioned.  No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

Comments

One Response to “Barclays Clones Its Own Inverse VIX ETN”

  1. Vance Harwood on January 22nd, 2011 11:00 am

    The reason Barclays created IVO is because XXV is close to being topped out. It can go no higher than 40, and it is at 33 right now (22% upside left). With IVO there is the potential to go from 20 to 40 (100%). See http://sixfigureinvesting.com/2011/01/xxv-nowhere-to-go and http://sixfigureinvesting.com/2011/01/ivo-etn

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