ETF Watch: Triple Exposure Oil Funds Launch

March 27, 2017

Today ProShares is rolling out two new funds that seek to fill the hole left by two popular products that were pulled off the market last year. In December, Credit Suisse, which sponsored the ETNs under the VelocityShares label, delisted and ceased creations for the VelocityShares 3x Long Crude Oil ETN (UWTI) and the VelocityShares 3x Inverse Crude Oil ETN (DWTI), two well-traded ETNs with combined assets of more than $1 billion at the time. Although the ETNs continue to trade on the over-the-counter market, multiple firms have launched products designed to take their place.

In that vein, ProShares is launching the ProShares UltraPro 3x Crude Oil ETF (OILU) and ProShares UltraPro 3x Short Crude Oil ETF (OILD) on the NYSE Arca exchange. Both products charge a management fee of 0.95%, making them the cheapest of the triple-exposure inverse and leveraged exchange-traded products covering crude oil futures. OILU and OILD are also the only ETF pairing that cover this particular space.

Rivaling Delisted Predecessors?

Immediately after UWTI and DWTI were delisted, another pair of similar ETNs rolled out under the VelocityShares name, except these notes were backed by Citigroup rather than Credit Suisse. The VelocityShares 3x Long Crude Oil ETN (UWT) and the VelocityShares 3x Inverse Crude Oil ETN (DWT) both come with an expense ratio of 1.50%. The products look like they are on track to rival their delisted predecessors, with $360 million in assets for UWT and $120 million in assets for DWT less than six months after their launches.

And in January, UBS rolled out a similar pair of ETNs, which also carry the ProShares brand. The UBS ETRACS-ProShares Daily 3x Inverse Crude ETN (WTID) and the UBS ETRACS-ProShares Daily 3x Long Crude ETN (WTIU) charge 1.85% and 1.45%, respectively.

Aside from their cheapness, the new products' ETF wrapper may hold some additional appeal for investors. When ETFs delist, they generally liquidate their holdings and distribute them to shareholders. Some investors who held UWTI and DWTI and didn’t sell their shares may be stuck in the products due to the crippled creation/redemption mechanism.

Contact Heather Bell at [email protected].

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