UBS To Launch 2x High-Income ETN

November 12, 2013

The search for yield heads into the world of leveraged exposure.

UBS tomorrow is launching a double-exposure version of a multi-asset income ETN it launched in September, hoping to entice investors with potentially twice the first fund’s total returns in an environment where investors are looking into all corners of the exchange-traded product universe for yield.

The Etracs Monthly Pay 2x Leveraged Diversified High Income ETN, which will trade on the NYSE Arca under the symbol “DVHL” and will be benchmarked to the NYSE Diversified High Income Index, measures the performance of a diversified basket of 138 publicly traded securities that typically pay high dividends or distributions. The ETN’s price wasn’t immediately available.

Currently, the index includes energy-related master limited partnerships and real estate investment trusts, among other sectors, and is split 60/40 percent between equities and fixed income. The leveraged resets monthly, making its return profile different than leveraged funds that rebalance daily.

The launch of the ETN makes UBS part of a trend in the world of exchange-traded products aimed at serving up income-rich investments at a time when the bond market is at a crossroads. Yields remain just above historical lows, but the normalization of borrowing costs risks creating capital losses for investors, some of whom are retirees who can scarcely avoid such costly declines.

Multi-asset income funds have become quite popular in the past 18 months or so, as IndexUniverse ETF Senior ETF Specialist Paul Britt wrote in blog earlier this year. That said, UBS appears to be the first to launch such a product in an ETN wrapper. The biggest fund by assets, the Guggenheim Multi-Asset Income ETF (CVY), has assets under management of almost $1.2 billion.


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