New iPath Commodity ETNs Look Like Cannibals

June 07, 2010

iPath is serving up a slew of new commodity exchange-traded notes almost identical to 19 ETNs it already has on the market, except the new ones are callable and 5 basis points cheaper. Whether the firm’s cannibalization plan works is anybody’s guess.

iPath, the line of exchange-traded notes backed by Barclays Capital, is issuing a total of 19 new commodities-related ETNs that replicate many of its existing products, with the key differences being that the new line is callable and also 0.05 percent cheaper than the existing one, according to a new filing with the Securities and Exchange Commission.

The broadest-based security on the list of new funds, the iPathDow Jones-UBS Commodity Index Total Return Callable ETN (NYSEArca: DJPC), will compete with the iPathDow Jones-UBS Commodity Index Total Return ETN (NYSEArca: DJP). DJP has almost $2 billion in assets, and is by far the most successful of the iPath ETNs being replicated. The rest of the ETNs are based on subindexes. The presence of a “C” at the end of the new symbols, as is the case with “DJPC,” is a recurring naming pattern that applies to many of the new funds, the filing showed.

The callability option gives Barclays a way to shut the funds should it ever have difficulty meeting its obligations under terms of the ETNs. It also brings Barclays into line with the callable feature of ETNs offered by PowerShares, which contain a provision allowing them to close in the event of regulatory intervention or an inability to hedge effectively. ETNs differ from ETFs in that they are essentially loan agreements between issuers such as Barclays and their holders. The issuer promises the holder of the notes the return of the underlying index, minus expenses.

The new iPath Callable ETNs will cost investors 0.70 percent a year in annual management fees, vs. 0.75 percent for its existing noncallable ETNs. In addition to DJPC, the new funds are:

  • The iPath Dow Jones-UBS Agriculture Subindex Total Return Callable ETN (NYSEArca: JJAC);
  • The iPath Dow Jones-UBS Aluminum Subindex Total Return Callable ETN (NYSEArca: JJUC)
  • The iPath Dow Jones-UBS Cocoa Subindex Total Return Callable ETN (NYSEArca: NIBC)
  • The iPath Dow Jones-UBS Coffee Subindex Total Return Callable ETN (NYSEArca: CAFE)
  • The iPath Dow Jones-UBS Copper Subindex Total Return Callable ETN (NYSEArca: JJCC)
  • The iPath Dow Jones-UBS Cotton Subindex Total Return Callable ETN (NYSEArca: BALC)
  • The iPath Dow Jones-UBS Energy Subindex Total Return Callable ETN (NYSEArca: JJEC)
  • The iPath Dow Jones-UBS Grains Subindex Total Return Callable ETN (NYSEArca: JJGC)
  • The iPath Dow Jones-UBS Industrial Metals Subindex Total Return Callable ETN (NYSEArca: JJMC)
  • The iPath Dow Jones-UBS Lead Subindex Total Return Callable ETN (NYSEArca: LDC)
  • The iPath Dow Jones-UBS Livestock Subindex Total Return Callable ETN (NYSEArca: COWC)
  • The iPath Dow Jones-UBS Natural Gas Subindex Total Return Callable ETN (NYSEArca: GAZC)
  • The iPath Dow Jones-UBS Nickel Subindex Total Return Callable ETN (NYSEArca: JJNC)
  • The iPath Dow Jones-UBS Platinum Subindex Total Return Callable ETN (NYSEArca: PLAC)
  • The iPath Dow Jones-UBS Precious Metals Subindex Total Return Callable ETN (NYSEArca: JJPC)
  • The iPath Dow Jones-UBS Softs Subindex Total Return Callable ETN (NYSEArca: JJSC)
  • The iPath Dow Jones-UBS Sugar Subindex Total Return Callable ETN (NYSEArca: SGAR)
  • The iPath Dow Jones-UBS Tin Subindex Total Return Callable ETN (NYSEArca: JJTC)

 

 

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