UBS announced the impending redemption (pdf) of a dozen ETRACS exchange traded notes (“ETNs”) linked to the performance of various VIX futures. The final value will be determined at today’s (9/7/12) market close. However, the products in question will continue to be listed and traded until the market closes on Tuesday 9/11/12. Current owners and traders need to be aware that prices could swing dramatically on Monday and Tuesday even though the “net asset values” of the notes will experience no change in value. See Five Steps to Avoid Disaster When Your ETF Closes for additional considerations.
The closing ETNs are:
- UBS ETRACS 1-Month S&P 500 VIX Futures ETN (VXAA)
- UBS ETRACS 2-Month S&P 500 VIX Futures ETN (VXBB)
- UBS ETRACS 3-Month S&P 500 VIX Futures ETN (VXCC)
- UBS ETRACS 4-Month S&P 500 VIX Futures ETN (VXDD)
- UBS ETRACS 5-Month S&P 500 VIX Futures ETN (VXEE)
- UBS ETRACS 6-Month S&P 500 VIX Futures ETN (VXFF)
- UBS ETRACS Daily Short 1-Month S&P 500 VIX Futures ETN (AAVX)
- UBS ETRACS Daily Short 2-Month S&P 500 VIX Futures ETN (BBVX)
- UBS ETRACS Daily Short 3-Month S&P 500 VIX Futures ETN (CCVX)
- UBS ETRACS Daily Short 4-Month S&P 500 VIX Futures ETN (DDVX)
- UBS ETRACS Daily Short 5-Month S&P 500 VIX Futures ETN (EEVX)
- UBS ETRACS Daily Short 6-Month S&P 500 VIX Futures ETN (FFVX)
Analysis/Opinion: Six of the closing ETNs were previously the most expensive ETPs on the planet with a 5.35% expense ratio. These incredibly ridiculous expense ratios escaped the attention of most analysts because they were disclosed as a 1.35% annual tracking fee along with a 0.077% weekly cost. I have been vocal in my opinion that regulators should not allow products to state ongoing expenses in weekly or other non-annualized terms. With the closure of these ETNs, the Alerian MLP ETF (AMLP) now holds the dubious honor of being the most expensive ETP in the known universe with its 4.86% and rising expense ratio.
The closing ETRACS ETNs were launched just a year ago on September 8, 2011 and have about $118 million in combined assets, for an average of under $10 million each. The smallest has less than $3 million while the largest comes in at nearly $18 million. Nine of the twelve closing ETNs are on ETF Deathwatch. They will not be missed.
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.