UBS, the Swiss bank known for its private-client investment
services, today launched a pair of ETNs that serve up an easy way
for investors to express a risk-on or risk-off trade, taking aim at
the increasing correlation among assets in markets globally.
Up until now, investors looking to take on risk or eliminate it
have had to individually buy and sell securities from various asset
classes that move in tandem or in opposition to one another.
But the ETRACS Fisher-Gartman Risk On ETN (NYSEArca:ONN) and the
ETRACS Fisher-Gartman Risk Off ETN (NYSEArca:OFF) put in
exchange-traded wrappers a basket of 35 securities including
equities, commodities, currencies and fixed income that together
amount to either risk-on or risk-off positions.
The two ETNs are essentially mirror images of each other. They
are designed to mix assets that either rise or fall given a
particular market outlook. For example, ONN features long positions
in equities and short positions in bonds, while OFF shorts equities
and goes long on bonds.
The funds target growing correlation among asset classes that
has characterized the aftermath of the market collapse of
2008-2009. Indeed, the gnawing cycles of hope and anxiety
surrounding the global economy has made outsized spikes and plunges
the norm for almost three years. ONN and OFF mark the first time
the asset management industry has designed products catered to the
The two ETNs bear the name of renowned macro traders Mark Fisher
and Dennis Gartman, in part, because the two approached UBS with
the risk-on/risk-off concept. The two are behind the Fisher-Gartman
ONN is a plain-vanilla long product, while OFF resets daily, an
acknowledgment that markets historically fall a lot faster than
The index underlying both ETNs was created earlier this month
and consists of a mix of long and short positions across various
asset classes whose overall value is designed to either rise with a
positive market outlook or decline in troubled waters.
It has value-based target weightings for the long and short
positions of 150 percent and 50 percent, respectively, and is
rebalanced quarterly, the company said on its website.
The index taps into energy, agriculture and metals through long
positions in futures-based commodities indexes; equities through
various exchange-traded products; and currencies and sovereign
bonds through futures contracts.
ONN allocates roughly a third of its long position to energy via
indexes such as the Dow Jones-UBS Crude Oil Subindex and the Dow
Jones-UBS Brent Oil Subindex.
About another third of the risk-on allocation is tied to
equities through ETPs such as the SPDR S'P 500 ETF (NYSEArca:SPY),
the PowerShares QQQ Trust (NYSEArca:QQQ) and the SPDR Dow Jones
Industrial Average ETF (NYSEArca:DIA).
The remainder of the long positions it splits among currencies,
agriculture and metals. ONN then shorts sovereign bonds, as well as
OFF shorts the same index underlying ONN and resets the
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