XXV: Barclays Abandons iPath Brand with Inverse Volatility ETN

Barclays launched a new inverse volatility exchange-traded note yesterday (7/19/10).  Offering no explanation in the press release, Barclays decided to abandon the popular and successful iPath brand of its two existing “long” volatility products.  Instead, Barclays is using the ETN+ brand that is currently associated with several struggling products.

The new ETN is called Barclays ETN+ Inverse S&P 500 VIX Short-Term Futures ETN (XXV).  Adding to the confusion, the XXV overview page on the BARX (the leading candidate for new brand name) website has a prominent ad for iPath, although it’s designed to look like part of the page.

XXV notes are set to mature in 2020, will pay no dividends, and are linked to the inverse performance of the S&P 500 VIX Short-Term Futures Index Excess Return.  They are essentially the inverse version of iPath S&P 500 VIX Short-Term Futures ETN (VXX) (VXX overview).

The XXV fact sheet (pdf) reminds us that these ETNs are unsecured debt securities and do not guarantee any return of principal at maturity or upon redemption.  Barclays currently has an AA- rating from S&P and Aa3 from Moody’s for “long-term, unsecured obligations.”  However, these securities are classified by Barclays as “global medium-term” notes.

The XXV pricing supplement (pdf) is 260 pages long (good luck with that).  A couple of points I was able to extract from the two-page summary include a Fee Rate of 0.89% and an early termination trigger if the intraday indicative value is less than or equal to $10 (a 50% decline from the initial $20 launch value).

Despite these obstacles, Barclays likely has a successful product in XXV.  This ETN will be useful for implementing various volatility strategies by itself or in conjunction with the two iPath ETNs that are long volatility (VXX & VXZ).  Maybe one day all three will unite under the same brand name.

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

4 Responses to “XXV: Barclays Abandons iPath Brand with Inverse Volatility ETN”

  1. Nino on July 20th, 2010 3:11 pm

    In the press release Barclay never said they abandon VXX. They just say they release a new ETN that actually is quite different from VXX: it is the exact opposite since it is the inverse of VIX while VXX tracks VIX.

  2. Ron Rowland on July 20th, 2010 4:22 pm

    A Barclays representative contacted me to let me know they haven’t “completely abandoned the iPath brand,” they only did so for this product. That was the point I was trying to make, but perhaps it came across that I was implying that iPath products no longer existed.

    Barclays has two ETN brands: iPath and BARX ETN+. I think it is clear to say that the iPath one is more successful. With the introduction of XXV, they had a choice. Their choice was to not use (abandon) the iPath brand for XXV.

    Now, to really clear things up, the Barclays representative also told me they may change XXV to the iPath brand at a later date if it makes sense from an investor prospective. Hello? It would have made infinitely more sense to do so from day one.

  3. Contact Management Sales on July 21st, 2010 2:48 am

    A Barclays representative contacted me to let me know they haven’t “completely abandoned the iPath brand,” they only did so for this product. That was the point I was trying to make, but perhaps it came across that I was implying that iPath products no longer existed.
    +1

  4. ETF DAILY NEWS » A Look At The New VIX ETN Landscape (XXV, VXX, VXZ, VIXX) on July 23rd, 2010 12:02 pm

    [...] Others have already weighed in on (NYSE:XXV), including excellent coverage of the potential of this ETF from Adam Warner at the Daily Options Report, particularly in To Err is Blog-Human and XXV Finale. Another interesting post comes from Volatility Futures & Options and attempts to reconstruct the historical performance of XXV in XXV – Inverse VXX ETF First Day of Trading. Not to be outdone, Ron Rowland of Invest with an Edge asks some pointed questions of the branding approach at Barclays in XXV: Barclays Abandons iPath Brand with Inverse Volatility ETN. [...]

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