Credit Suisse 2X US Large-Cap ETN Live

October 18, 2013

Another Fisher Investments-linked ETN focused on large-cap stocks comes to market.

Credit Suisse today is rolling out a double-exposure exchange-traded note on the NYSE Arca targeting U.S. blue chip companies, a “me-too’ ETN that follows by about four months a similar security launched by another Swiss bank, UBS.

The Credit Suisse FI Enhanced Big Cap Growth ETN, which will have its primary listing on NYSE’s Arca platform under the symbol “FIBG,” is linked to the performance of the Russell 1000 Growth Index Total Return, a benchmark that tracks the performance of the large-cap growth segment of the U.S. equity market, according to a regulatory filing.

FIBG rivals a similar offering from UBS dubbed the AG FI Enhanced Big Cap Growth ETN (FBG), which also offers double exposure to the same growth-focused variation of the Russell 1000 Index. The $908.8 million FBG is up 36.8 percent year-to-date, and has netted $696.6 million in inflows, most of it at the time of its launch in May.

FIBG and FBG are but two of a number of “FI” ETNs rolled out over the past several months that are associated with West Coast-based Fisher Investments. The two Russell 1000-linked ETNs and two double-exposure “FI” notes focused on European blue chips all appear to be “bespoken,” which is to say they aren’t really meant for investors at large, but rather, a tight coterie of high net worth individuals or institutions looking for custom exposure via ETNs. Additionally two other "FI" ETNs are now  on the market, each targeting the MSCI World High Dividend Index.

It’s thus difficult to ascertain exactly what investors are hoping to achieve by owning such ETNs, though it seems a fair guess that betting on developed-market equities seems reasonably prospective at a time when Europe is stabilizing and the United States appears to be leading the global economy out of the aftermath of the financial crises of the past five years.

UBS’ FBG has an annual expense ratio of 1.20 percent, or $120 for each $10,000 invested. The new Credit Suisse ETN, like many ETNs, has a rather complicated “investor fee.”

According to the preliminary pricing supplement, FIBG’s cost is measured in the following way:

“On any ETN Business Day following the Inception Date, the Exposure Fee will be equal to the product of (1) the Index Units as of the previous ETN Business Day times (2) the Financing Rate as of the most recent Quarterly Reference Date prior to the current ETN Business Day times (3) the Closing Level of the Index as of the most recent Quarterly Reference Date prior to the current ETN Business Day times (4) the Day Count Fraction.”

The “Financing Rate” was meanwhile characterized as:

“On any LIBOR Business Day, the Financing Rate will be equal to the Reference Rate applicable on the immediately preceding Quarterly Reference Date, plus a spread of 0.52 percent (52 basis points).

By comparison, a somewhat similar security that offers up double exposure to U.S. large-caps, the ProShares Ultra S&P500 ETF (SSO), has an annual expense ratio of 0.90 percent, or $90 for each $10,000 invested.

However, SSO is an ETF and not an ETN, and the portfolio of SSO is rebalanced daily, while the rebalancing of all the FI-linked ETNs is triggered at certain price points as the securities decline.

 

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