UBS lists next-generation commodity ETRACS ETN (BLND)

Apr 27th, 2012 | By | Category: Commodities

UBS, the Switzerland-headquartered investment bank, has launched the ETRACS DJ-UBS Commodity Index 2-4-6 Blended Futures ETN (BLND), an exchange-traded note (ETN) providing exposure to commodities.

UBS lists next-generation commodity ETRACS ETN

UBS has launched the ETRACS DJ-UBS Commodity Index 2-4-6 Blended Futures ETN (BLND), a next-generation commodity ETN providing exposure to a broad range of commodities. Energy is the largest weight, with approximately 33%.

The ETRACS DJ-UBS Commodity Index 2-4-6 Blended Futures ETN tracks the Dow-Jones-UBS Commodity Index 2-4-6 Forward Blend Total Return (Index ticker: DJUF246T), an enhanced version of the Dow-Jones-UBS Commodity Index.

The index is constructed as an equally-weighted basket of the two-month, four-month and six-month forward versions of the Dow Jones-UBS Commodity Index, providing diversification across the commodity price curve of each of the 20 commodities that currently comprise the index.

By diversifying exposure across multiple commodity futures maturities, the index seeks to limit concentration at any one point on the respective commodity futures price curve. Historically, including exposure to longer-dated maturities has helped to mitigate the costs associated with holding and rolling shorter-dated commodity futures positions, commonly referred to as negative roll yield.

“Negative roll yield adversely impacts returns on exchange-traded products based on commodity futures positions,” said Christopher Yeagley, Managing Director and US Head of Equity Structured Products at UBS. “The ETRACS DJ-UBS Commodity Index 2-4-6 Blended Futures ETN – the first ETN based on the second generation of the benchmark Dow Jones-UBS Commodity index – gives investors the opportunity to minimise roll risk through its diversified exposure to the index’s longer dated futures positions.”

The DJ-UBS Commodity Index 2-4-6 Forward Blend Total Return is composed of the prices of twenty exchange-traded futures contracts on physical commodities. Currently, the index included aluminium, Brent crude, coffee, copper, corn, cotton, WTI Crude Oil, gold, heating oil, lean hogs, live cattle, natural gas, nickel, silver, soybeans, soybean oil, sugar, unleaded gas, wheat and zinc.

The ETN is listed on the NYSE Arca and has a fee of 0.70% per annum.

Dow-Jones-UBS Commodity Index

(Source: Dow Jones Indexes)

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