Barclays Adds Inverse ETN To VIX Lineup

By Staff
July 19, 2010

Barclays rolls out its third ETN focused on the VIX ‘fear index,’ this one designed for investors betting on low volatility.

Barclays Capital, the investment banking division of U.K.-based Barclays Bank PLC, today rolled out the first inverse exchange-traded note tied to VIX volatility futures, a tool designed to give investors a way to bet that market volatility will remain low.

The rollout of the Barclays ETN+ Inverse S&P 500 VIX Short-Term Futures ETN (NYSEArca: XXV) brings to three the number of ETNs Barclays is marketing that are tied to the so-called fear index, which spikes when the S&P 500 plunges. All three products have expense ratios of 0.89 percent a year.

"Investors are increasingly looking for diversified ways to access equity market volatility," Philippe El-Asmar, head of Investor Solutions at Barclays Capital, said in a press release. "We are pleased to provide them with the first exchange traded product that allows them to express a bearish view on volatility."

The new ETN is linked to the inverse performance of the S&P 500 VIX Short-Term Futures Index Excess Return. The index is designed to reflect returns that are potentially available through an unleveraged investment in short-term futures contracts on the CBOE Volatility Index, known as VIX Futures.

XXV is an uncollateralized debt obligation of Barclays Bank PLC with a 10-year maturity.

The other two VIX ETNs backed by Barclays are the iPath S&P 500 VIX Short-Term Futures ETN (NYSEArca: VXX) and the iPath S&P 500 VIX Mid-Term Futures ETN (NYSEArca: VXZ).

The two ETNs were the second- and third-best performers among U.S. exchange-traded products on Friday, as volatility returned to the U.S. market stock market amid weak corporate earnings and economic data, according to data compiled by

A fourth VIX-related product, an ETF from Jefferies Asset Management that’s in the works, is well into its registration process at the Securities and Exchange Commission. The proposed Jefferies S&P 500 VIX Short-Term Futures ETF (NYSEArca: VIXX) will also have an expense ratio of 0.89 percent. Jefferies is a Stamford, Conn.-based money management firm known for its commodity ETFs.


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