Credit Suisse, the bank that recently agreed to sell its
European ETF operations to iShares, filed paperwork with regulators
to market a gold-linked ETN that will feature long exposure to
physical gold coupled with an overlay of call options, a so-called
covered-call strategy that could milk extra returns out of a
12-year gold rally that may be growing long in the teeth.
It's not clear when the Credit Suisse Gold Flows Index ETN will
come to market, but prospectuses detailing exchange-traded notes
typically surface just prior to the actual launch of a given
security, and the regulatory paperwork suggests that ETN's rollout
could come as soon as the end of this month. The ETN will have its
primary listing on the Nasdaq and GLDI will be its ticker, the
The ETN, which will come with an annual fee of 0.65 percent of
assets, or $65 for each $10,000 invested, will have notional
exposure to the bullion ETF SPDR Gold Shares (NYSEArca:GLD) while
notionally selling monthly "out of the money" call options,
according to the paperwork.
It's anybody's guess what the future holds given the lengthy
aftermath to the market crash of 2008, but doubts in some corners
of the financial market are beginning to surface about whether
gold's long run may be running its course. GLDI might be the
perfect security for investors who are on the fence about that
issue, as it represents a somewhat neutral view on gold.
Premiums on the notional sale of the call options will be
received monthly, the company said. The ETN is designed to enhance
current cash flow through those premiums in exchange for giving up
any gains beyond 3 percent per month.
Apart from those premium payments softening the blow of a
sell-off in GLD, nothing about the security is designed to provide
The ETNs, which will mature on Feb. 2, 2033, are subject to
early redemption or acceleration "in whole or in part at any time,"
according to the prospectus.
They will have an initial "principal amount" of $20 per
ETNs are senior unsecured obligations-in this case of Credit
Suisse's Nassau branch. Unlike
, they have no tracking error, but, also unlike ETFs, they
represent a credit risk. For example, if Credit Suisse ever faced
bankruptcy, holders of GLDI would likely lose their entire
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