Gold-Indexed ETN, Hedged S&P 1500 ETF Launch

June 17, 2021

One of the largest banks in the world and a fund manager each launched new exchange-traded products on Wednesday, with both seeking to offset the effects of major swings in underlying indices.

Managed Exposure For Gold Bugs

Barclays Bank issued $250 million in new exchange-traded notes under the Pacer iPath Gold Trendpilot ETN (PBUG) on the NYSE Arca. The ETN’s underlying index allocates to a gold exposure in increments of 100%, 50% or 0% based on market signals.

Generally, the underlying index tracks three-month gold futures but features a trigger if the index swings more than 20% in either direction of the moving average of its last 200 days.

If the index shows a gain on the average of five straight trading days without breaching the 20% limit, the ETN aims to produce returns tied to that index. If the opposite occurs and the gold index declines for five days, the ETN shifts off its weights to avoid a bearish trend for the metal, relying instead on the three-month U.S. Treasury Bill interest rate.

If the index breaks either side of the 20% change trigger in a day, the fund cuts its weighting to the gold index in half.

PBUG is a sister ETN to Barclays’ Pacer iPath Gold ETN (GBUG), which tracks the same three-month gold index without a reweighting mechanism in the event of violent price movements. Investors will pay a fee of 0.65% annually to hold PBUG, while the GBUG has no expense ratio at all.

Hedging S&P Downturns With Options

Meanwhile, Syntax Advisors launched the Syntax Stratified U.S. Total Market Hedged ETF (SHUS), also on the NYSE Arca.

The fund tracks the S&P 1500 Index and weights its holdings to avoid overinvesting in specific industries subject to the ebb and flow of the business cycle. At the same time, it uses short-term options against the index and 12- to 24-month spread options to provide a hedge against a broader downturn.

The hedging strategy raises the fund’s expense ratio to 0.65%, or 30 basis points higher than its nonhedged sibling, the Syntax Stratified U.S. Total Market Hedged ETF (SYUS). That expense ratio is also scheduled to rise to 1.3% after a fee waiver and reimbursement strategy expires next May.

Contact Dan Mika at [email protected]

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