AccuShares ETFs: A Look Under The Hood

June 15, 2016

[The following "ETF Industry Perspective" is sponsored by AccuShares]

Today's range of ETFs is so broad that investors can execute a long or short position in almost any asset class without leaving the ETF marketplace. Conventional ETFs deliver their impressive range of long, short and geared positions through creatively accessing securities, futures and swaps. While most ETFs strive for simplicity, the underlying positions can introduce complexities in exposure, rebalancing and taxes.

AccuShares Funds are the first U.S.-listed funds with two share classes designed to eliminate many of these complications and enable investors to directly access both sides of a market through a single fund's shares.

Many investors have wanted to access the "short side" of a market without the complications and uncertainties that can come from daily rebalancing in conventional inverse funds. Conventional inverse funds are usually hampered by daily rebalancing, which can prevent them from delivering institutional returns—AccuShares Funds do not compound or rebalance daily, and the Down (or "inverse") shares are designed to mirror the Up (or "long") shares between index settings.

Similarly, many investors are discouraged from investing in certain ETFs because of the complexity of K-1 tax reporting.

AccuShares Funds provide investors market access without the burden of K-1s, as tax reporting is delivered through Form 1099.

AccuShares funds are designed to operate in markets where there are historically robust flows in products used by bullish and bearish investors such as conventional and inverse ETPs as well as previously attempted "teeter-totter" funds.

How Does A 2-Share Class Fund Work?
At fund launch (and immediately following each distribution date), the class values (aka the "NAV"s) for the Up and Down share classes are equal. Up shares are designed to increase the class value with an increase in the level of the index, and Down shares are designed to increase the class value with a decline in the level of the index. Index gains in either share class has a corresponding decline in the other share class.

Regular distribution dates are monthly, but an intramonth index movement of 75% or greater will trigger an interim ("Special") distribution.

AccuShares Funds hold only cash and cash equivalents, and the share classes receive any interest earned less Fund management fees.

When the index rises, the class value for the Up share is designed to increase, and the class value for the Down share is designed to decline.

The gain in the Up share class relating to the index increase is offset by a decline in the Down share class—it is this "offsetting" feature of the Fund's share classes that allows an AccuShares Fund to deliver index returns without reliance on transacting in securities related to the underlying index.

To illustrate the above concept, if the depicted share class values of 27 and 23 for the Up and Down shares, respectively, occurs on a distribution date, the Up share class would receive a distribution of 4 (i.e., 27-23).

Movements in share class values in either direction are subject to the Special distribution trigger and are limited to 90% between resets.

Investors should purchase Up or Down class shares based on their belief in the future direction of the underlying index.

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