UBS Investment Bank (NYSE: AG), the purveyor of the ETRACS exchange traded notes, launched a leveraged S&P 500 ETN that resets its holdings on a monthly basis.
According to a press release, the ETRACS Monthly Reset 2xLeveraged S&P 500 Total Return ETN (NYSEArca: SPLX) began trading Wednesday, March 26.
The ETN tries to reflect the monthly compounded 2x, or 200%, leveraged performance of the S&P 500 Total Return Index.
“The S&P 500 Total Return Index is widely regarded as the best gauge of large cap US equities and a bellwether for the US economy,” Paul Somma, Senior ETRACS Structurer, said in the press release. “SPLX allows investors to get 2x leveraged exposure to this benchmark index by way of a product whose leverage resets monthly and not daily.”
Most leveraged exchange traded funds reset holdings on a daily basis. For instance, the ProShares Ultra S&P500 (NYSEArca: SSO), the largest leveraged ETF with $3.2 billion in assets under management, tries to reflect the 2x daily return of the S&P 500.
Due to the compounding effects, leveraged fund investors may enjoy higher gains in trending markets, such as in 2013, but they must also be willing to accept heavier losses, especially in volatile market conditions. [What Are Leveraged ETFs?]