VelocityShares, the exchange-traded note provider known largely for its lineup of volatility-related ETNs, called for redemption of two pair of double-exposure notes targeting copper and palladium on Jan. 2 that have collected almost no assets since they were rolled out over the past year.
The ETNs, their assets and their launch dates are as follows:
- VelocityShares 2x Long Copper ETN due February 9, 2032 (NYSEArca: LCPR), $1.65 million and launched in February 20012
- VelocityShares 2x Inverse Copper ETN due February 9, 2032 (NYSEArca: SCPR), $510,000 and also launched in February 2012
- VelocityShares 2x Long Palladium ETN due October 14, 2031 (NYSEArca: LPAL), $1.09 million and launched in October 2011
- VelocityShares 2x Inverse Palladium ETN due October 14, 2031 (NYSEArca: IPAL), $280,000 and launched in October 2011
The closing down of the strategies put an exclamation point on a record year of closures of exchange-traded products. ETF and ETN sponsors have announced a total of 106 ETPs this year, easily shattering the previous record.
In 2011, 30 funds shut down, compared with 49 in 2010, 56 in 2009, 59 in 2008 and none in 2007, according to data compiled by IndexUniverse.
Industry sources say the industry is starting to mature and, moreover, the risk-on/risk-off flavor of markets since the 2008 crash has made fund sponsors more cautious in general about launching new ideas or defending ones that aren’t catching on very quickly.
Moreover, pruning product offerings can free up resources for fund sponsors to pursue newer, more prospective fund ideas more thoroughly and aggressively.
Investors will receive a cash payment per ETN equal to the arithmetic average of the closing indicative values of such ETNs during their respective accelerated valuation periods, according to a communique issued by the New York Stock Exchange detailing the delisting of the securities.
Arca, the NYSE’s electronic trading arm, said it will suspend the ETNs from trading before the start of the session on Wednesday, Jan. 2.
“Investors should be guided by the news releases issued by Credit Suisse in connection with these early redemptions as well as each issue's respective prospectus,” Arca said, referring to the bank that backs the ETNs.
If CalPERS is taking hedgies out, ETFs may be coming back in.
As valuations grow uncomfortably high, ‘quality’ ETFs makes more sense—if you can figure out just what quality means.
‘Smart beta’ almost surely means loss of more market share for active managers.
Be careful of your assumptions (and headlines!) about volatility ETFs.