3x Oil ETN Pair Debuts

September 15, 2017

Today Credit Suisse is rolling out a pair of ETNs offering triple exposure to the S&P GSCI Brent Crude Index. The Credit Suisse AxelaTrader 3x Long Brent Crude Oil ETN (UBRT) and Credit Suisse AxelaTrader 3x Inverse Brent Crude Oil ETN (DBRT) are just the latest duo of products of this nature.

Both funds list on the NYSE Arca. UBRT comes with an investor fee of 1.35%, while DBRT charges 1.65%.

Interestingly, Credit Suisse was behind the popular VelocityShares 3x Long Crude Oil ETN (UWTI) and VelocityShares 3X Inverse Crude Oil ETN (DWTI), which shut down suddenly in December last year. The speculation at the time was that the firm was trying to clean up its balance sheets and the large ETNs represented a liability.

Since those closures, there has been a small wave of products rushing in to fill the void left by their sudden absence. This has occurred despite the fact that VelocityShares launched another pair of similar ETNs the day after the originals delisted, with the newer pair backed by Citigroup.

This year alone has seen three 3x leveraged/inverse pairs of products roll out by the end of July from ProShares, United States Commodity Funds and UBS.

A New Twist
The new Credit Suisse products are mainly differentiated by the fact that they track Brent crude oil versus the West Texas Intermediate (WTI) contracts the other ETFs and ETNs are tied to.

Brent crude is extracted from wells in the North Sea, and serves as the benchmark price for the majority of the world’s oil. WTI is extracted in the U.S., and is the more significant contract domestically. However, the two oil types have seen their global significance wax and wane relative to each other over the last decade or so.

The Financial Times recently noted that the spread between the two types of crude is currently at a two-year high.

USCF Plans Private Equity Funds

In a recent filing, USCF Advisers outlines plans for two ETFs that will focus on companies likely to be the investment targets of private equity firms. The USCF SummerHaven Private Equity Strategy Index Fund (BUY) and the USCF SummerHaven Private Equity Natural Resources Strategy Index Fund (BUYN) will track indexes from SummerHaven Index Management that rely on proprietary methodologies.

The two funds are slated to list on the NYSE Arca, but the filing did not include expense ratios.

Both indexes aim to select companies of any size between $100 million and $10 billion in market capitalization that also exhibit low EV/EBITDA ratios, low net equity issuance and low market capitalization, as well as moderate profitability, the prospectus said.

Methodology

However, the methodology specifically notes that the funds do not invest directly in private equity funds or actual private equity, and BUYN specifically will only invest in natural resource commodity firms. Both indexes are equally weighted and rebalance on an annual basis.

BUY will select its holdings from a 3,000 U.S. companies, aiming to cover either 200 companies from that pool or 20% of the universe, whichever is greater.

Somewhat similarly, BUYN will do the same with natural resource equities, selecting its holdings from a pool of roughly 600 securities. The index will include either 80 companies or 40% of the investment universe, whichever is greater, the prospectus said.

The fund appears to be the first of its kind. Although there are several ETFs targeting private equity firms, including the $305 million PowerShares Global Listed Private Equity Portfolio (PSP), there aren’t any that focus on the companies that private equity firms invest in.

Contact Heather Bell at [email protected]

 

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