UBS launches “risk on, risk off” ETNs

Dec 2nd, 2011 | By | Category: Alternatives / Multi-Asset

UBS has launched a pair of ETNs, linked to the Fisher-Gartman Risk Index, that provide investors with a quick and easy way to implement a broad “risk on” or “risk off” trade.

UBS launches "risk on" and "risk off" ETNs

UBS has launched a pair of ETNs, linked to the Fisher-Gartman Risk Index, that provide investors with a comprehensive way to implement a broad “risk on” or “risk off” trade.

Prior to this launch, investors wanting to increase or reduce broad market risk in their portfolios, without wishing to take on asset-specific risk, had to individually buy or sell a cross-section of securities from a range of various asset classes. The ETRACS Fisher-Gartman Risk On ETN and the ETRACS Fisher-Gartman Risk Off ETN together offer an alternative option.

The ETNs, which are essentially mirror images of each other, track a basket of 35 securities including energy, agriculture and metal commodities, equities, currencies, and domestic and foreign government bonds that together represent either risk-on or risk-off positions.

Risk on

The Risk On ETN provides investors with the ability to implement a comprehensive “risk on” trade through the purchase of a single, exchange-traded security which is expected to rise when the outlook on markets and the broader economy is positive and to decrease when such outlook is negative

The Risk On ETN provides long exposure to the daily performance of The Fisher-Gartman Risk Index, and, as such, investors gain exposure to an index comprised of long positions in “risk on” instruments and short positions in “risk off” instruments linked to commodities, equities, currencies and sovereign bonds.

Risk off

The Risk Off ETN works in reverse and offers the ability to execute a comprehensive “risk off” trade via a single purchase. By providing investors with effective long exposure to “risk off” instruments and short exposure to “risk on” instruments, the Risk Off ETN’s value is, therefore, expected to rise when the outlook on markets and the broader economy is negative and to decrease when such outlook is positive.

“Correlation between asset classes and across geographic regions has risen dramatically over the past two decades as investors move in concert in reaction to changes in the global economic outlook,” said Christopher Yeagley, Managing Director and US Head of Equity Structured Products at UBS.

“These two ETNs are designed to give investors the ability to take advantage of this in a straightforward manner: if they expect economic growth, they can purchase ONN to express a “risk on” view, and if they don’t expect growth, they can purchase OFF to express a “risk off” view.”

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