Citi Revives Popular Leveraged Oil ETNs That Credit Suisse Killed

  • New notes provide triple-leveraged exposure to oil movements
  • Janus’s VelocityShares remains marketing agent for securities

Two of the more popular financial products of 2016 are back from the dead.

Citigroup Inc. rolled out a couple of risky triple-leveraged exchange-traded notes tied to oil on Friday after Credit Suisse Group AG delisted two eerily similar ETNs. The notes had gained attention earlier in the year as oil prices plummeted and investors, particularly millennials, starting pouring cash into them.

The marketing agent for the Citigroup notes is Janus Capital Group Inc.’s VelocityShares, which also was the brand on the Credit Suisse products. The new notes are called VelocityShares 3x Long Crude Oil ETN and VelocityShares 3x Inverse Crude Oil ETN, the old notes were the VelocityShares Daily 3x Long Crude ETN and VelocityShares Daily 3x Inverse Crude ETN. The ticker symbols for the Citigroup notes are UWT and DWT, a slight change from UWTI and DWTI for the Credit Suisse notes.

“They’ve quite obviously and deliberately made the new products as similar as humanly possible,” said Dave Nadig, chief executive officer of ETF.com. “The names are literally the same and the tickers are one letter off, absolutely creating a recipe for investor confusion.”

The outgoing Credit Suisse notes were delisted with more than $740 million in assets. The move was part of the bank’s aim to better align its product offerings “with its broader strategic growth plans,” according to a Nov. 16 statement.

Nadig said the desk at Credit Suisse that monitors the bank’s risk exposure may have decided to dump the notes when evaluating the liability of a fast-growing, leveraged product.

“For whatever reason, Citi is willing to use its balance sheet for the same exact exposure, whereas Credit Suisse decided they’d had enough,” he said.

Scott Helfman, a spokesman for Citigroup, and Azar Boehm, a spokesman for Credit Suisse, declined to comment.

While the new ETNs are similar in structure and linked to the same S&P GSCI Crude Oil Excess Return Index, there are a few differences between old and new. In particular, the new notes are more expensive.

The Citigroup-backed products will have expense ratios of 1.5 percent, while the old ones were 1.35 percent, according to the prospectuses.

“At the end of the day, leveraged oil products have been very popular for trading and if you look at trading volumes they’re some of the most actively traded securities in the United States on any given day,” said Nick Cherney, chief investment officer at VelocityShares. “We’re very optimistic that investors will find the new launch helpful in their trading strategies.”

The Credit Suisse notes, which made bets on oil prices to either climb or plunge, at one point had almost $2 billion in combined market value. But the 3x Long Crude ETN lost about $1 billion in assets over the past two weeks. The bank decided not to liquidate them, which would have returned cash to investors, but delisted instead. That could make it tough for noteholders to find buyers.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE