Well, That Was Fast: Exchange-Traded Note Edition
Here is the fine print from the prospectus for UBS's ETRACS 2xMonthly Leveraged S&P MLP Index ETN. Click to enlarge.
We hope you read it carefully.
UBS announced on Wednesday it is exercising its right to call back the notes. It's rather a surprise given that the product—which offers investors leveraged exposure to master limited partnerships in the S&P MLP Index—was launched a mere six months ago.
So much for that 2045 maturity date.
The proximate cause of the early redemption is, per the prospectus, the fact that the notes' intraday value dipped below $5.00.
While MLPs were the darlings of yield-chasers in recent years, the air had, in the summer of 2015, already begun to come out of their collective tires because of the precipitous drop in the price of oil.
It's worth asking, as some have already done, just who was clamoring for an unsecured note tracking the S&P MLP index with 2x leverage in July of last year, and why.
For what it's worth, UBS also announced it is redeeming the ETRACS 2x Monthly Leveraged Long Alerian MLP Infrastructure ETN, launched in 2010.