Today UBS rolled out the Etracs Monthly Pay 2xLeveraged MSCI US REIT Index ETN (LRET), which provides 200 percent exposure to the monthly return of the MSCI US REIT Index.
However, in addition to doubling the returns, the note also pays out a monthly coupon that reflects the cash distributions of its index’s components. As with those returns, the coupon essentially doubles the amount of the distributions; according to a UBS fact sheet, as of April 30, the doubled index yield for LRET’s underlying index was 7.45 percent.
The underlying index has 140 constituents, with the largest including Simon Property Group, Public Storage, Health Care REIT, Equity Residential and Ventas Inc. Those five companies represent roughly 23 percent of the total index weight.
The “annual tracking rate” or expense ratio associated with the notes, is 0.85 percent, which is cheaper than the two other ETFs providing leveraged exposure to real estate. The ProShares Ultra Real Estate ETF (URE) comes with an expense ratio of 0.95 percent, while the Direxion Daily Real Estate Bull 3x ETF (DRN), which provides triple exposure to the same index as LRET, charges 0.98 percent.
Long/Short Debt Fund Plan
ETF Issuer Solutions recently filed for an actively managed long/short fixed-income ETF that will be subadvised by Bramshill ETF Management and target high-yield debt. It would be the first ETF of this nature to list in the U.S.
The AltShares Long/Short High Yield Fund (LSHY) will primarily select its holdings from the components of the Bloomberg USD Corporate High Yield Bond Index, taking long positions in securities that Bramshill thinks will outperform based on its relative value and trend analysis assessments.
It will take short positions in components Bramshill believes will underperform, particularly those that have high default risks. According to the prospectus, accounting irregularities, falling into an overbought sector and weak fundamentals are all reasons Bramshill might adopt a short position in a security.
The overall portfolio will include as many as 200 different securities positions, with an aggregate exposure that can range from -20 percent to 100 percent. Despite its focus on the Bloomberg index, the fund has a sort of “go anywhere” ethos, with no limits placed on its maturity or duration and the freedom to invest in both investment-grade and high-yield debt.
The only notable restriction, which is more of a guideline, is that the fund will “generally” keep positions in individual issuers to 10 percent or less of the portfolio. LSHY’s prospectus also warns that the fund will likely experience higher-than-average turnover due to the nature of its underlying strategy.
The filing did not include an expense ratio, but it did note that the fund would list on the NYSE Arca.