CSMN: Market Neutral ETN from Credit Suisse

September 23, 2011 by  
Filed under Commentary, ETF IPOs (New ETFs), ETNs

Credit Suisse launched a new exchange-traded note (“ETN”) on Wednesday (9/21/11) linked to the performance of an index designed to provide exposure to a market neutral investment strategy on North American, European, and Japanese stocks.  The Credit Suisse Market Neutral Global Equity ETN (CSMN) will track the HS Market Neutral Index Powered by HOLT, minus the investor fee of 1.05%.

The underlying index typically consists of 75 long positions at 1.33% each (100% allocation) and another 75 short positions (an inverse 100% allocation).  The selection universe consists of 750 stocks (275 North America, 300 Europe, and 175 Japan) based on size and liquidity constraints.

Stocks are grouped into 10 sectors and ranked by the proprietary Credit Suisse HOLT system, a cash-flow-return-on-investment framework.  Stocks in the top 10% of each sector and top 34% of each region are included in the long allocation.  The short allocation then pairs the selected longs with the lowest ranked stocks in the same sector and region to ensure market neutrality.

The index has been in existence for four years, and the performance looks like this (chart from CSMN fact sheet): HS-market-neutral-index

Although the index is market neutral within each sector (“sector neutral”), the sectors with the largest number of positions include Financials 17%, Consumer Cyclical 17%, Consumer Non-cyclical 13%, Communications 13%, and Industrials 12%.  Data on current region allocations was not available.

Because CSMN is an ETN instead of an ETF, it is an unsecured debt obligation subject to the credit risk of Credit Suisse.  The overview page contains additional information and provides links to the fact sheet and prospectus.

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.

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