VelocityShares has rolled out two new composite forward LIBOR rate-linked exchange traded notes to help fixed-income investors better manage risks in a rising interest rate environment.
On Wednesday, VelocityShares launched the VelocityShares Long LIBOR ETNs (NYSEArca: ULBR) and the VelocityShares Short LIBOR ETNs (NYSEArca: DLBR). Both ETNs have a 1.50% expense ratio.
Both new ETNs are linked to a Janus Velocity LIBOR Index.
According to the prospectus, the Long LIBOR Index tries to reflect the daily performance of a long investment in the composite forward LIBOR rate by tracking the return on a short position in Eurodollar futures contracts where the position is recalibrated daily to result in a return that approximates the percentage change in the composite forward LIBOR rate over the next day. If the composite forward LIBOR rate is less than the long LIBOR floor of 1.00% on an Index Business Day, the Long LIBOR Index will try to approximate only a portion of the percentage change in the composite forward LIBOR rate over the next day.
The Short LIBOR Index tracks the return on a long position in Eurodollar futures contracts where the position is recalibrated daily to result in a return over the next Index Business Day that approximates to the inverse of the percentage change int eh composite forward LIBOR rate over the next day. If the composite forward LIBOR rate is less than the short LIBOR floor of 2.50% on any Index Business Day, the Short LIBOR Index will try to approximate only a portion of the inverse of the percentage change in the composite forward LIBOR rate over the next day.