Thin Trading Triggers GRN’s Volatility

May 03, 2013

Traction issues fuel the performance volatility of iPath’s carbon ETN ‘GRN.’


With hardly any assets, a nuanced investment base and some seriously volatile performance records, it’s hard to call the iPath Global Carbon ETN (NYSEArca: GRN) anything but weird. Still, GRN’s performance history is a mixed bag when compared with its peers in the alternative energy ETP space, with large fluxes in both directions.

But how real is that performance?

While it’s true that GRN frequents the daily and weekly performance lists on both IndexUniverse and its commodity sister site—sometimes to the tune of -34.5 percent within a five-day trading period—the fund’s exaggerated performance fluctuations aren’t the byproduct of heavy trading. In fact, they’re attributable to quite the opposite phenomenon.

The fund’s 60-day average trading volume is 1,941 shares. For perspective, the creation unit for this ETF is 50,000 shares, which means its 60-day average is less than 4% of a single creation unit. On its busiest trading day within the past year—April 16, 2013—GRN traded just over 21,000 shares.

GRN Volume

Infrequent trading means huge movements in performance metrics when a trade actually occurs, which explains why GRN appears to be one of the best- and worst-performing exchange-traded products on any given day. In fact, it’s one of the worst-performing ETFs year-to-date.

To know what’s deterring investors, let’s take a look at the holdings that make up this iPath ETN. GRN holds futures for carbon credits, which are essentially permission slips for corporations to emit an agreed-upon level of carbon into the atmosphere.

The index that underlies GRN—the Barclays Capital Global Carbon Index Total Return—currently holds two carbon credit plans: the European Union Emission Trading Scheme and Kyoto Protocol's Clean Development Mechanism.

Comparatively, other “green” exchange-traded products, like wind or solar, invest in the companies that produce energy or manufacture the technology required to harness that energy.

What's great about exchange-traded products is that they give investors access to all sorts of corners of the market to which they'd previously been shut out,” said Dave Nadig, IndexUniverse's president of ETF Analytics.

Unfortunately, that also means sometimes those ETPs end up languishing. GRN is a case in point where both the underlying market has had significant issues gaining traction, and the ETN itself has had issues gaining traction,” he added.


Even though GRN has been on the market for nearly five years, it has only $510,000 in assets. The First Trust ISE Global Wind Energy Index fund (NYSEArca: FAN), which launched shortly after GRN, in June 2008, has $22.4 million in AUM, and the Guggenheim Solar fund (NYSEArca: TAN), which launched in April 2008, has over $70 million in assets.

With equally aged products like FAN and TAN gathering up to a thousand times the assets of GRN, it serves to conclude that investors might find tangible assets more attractive in the world of “green” investing rather than opting for GRN’s ultra-progressive carbon credit holdings.

At the time this article was written, the author held no position in the security mentioned. Contact Hannah Tool at [email protected].


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