Wednesday, November 30, 2011

"Risk On", "Risk Off" Has Officially Jumped the Shark as UBS Rolls Out Risk On and Risk Off ETNs

Presented with little comment but eyes rolled, via IndexUniverse.  While not surprising in this era of everything on Earth correlated, it is a jump the shark moment.

Personally I would have called it Lemmings On and Lemmings Off ETNs but these investment banks don't know the first thing about marketing.  Can you imagine how cool it would be to sit at the trading desk of hedge fund XYZ:  "Dude, I'm going all in Lemming Long, put me in for 18 million!!"  (34 minutes later)  "Lemming Short time - filler up!" (while popping some 5 Hour Energy)  That said, they did get some cool ticker symbols.

  • UBS, the Swiss bank known for its private-client investment services, today launched a pair of ETNs that serve up an easy way for investors to express a risk-on or risk-off trade, taking aim at the increasing correlation among assets in markets globally.
  • Up until now, investors looking to take on risk or eliminate it have had to individually buy and sell securities from various asset classes that move in tandem or in opposition to one another.  (but that's too much work!
  • But the ETRACS Fisher-Gartman Risk On ETN (NYSEArca: ONN) and the ETRACS Fisher-Gartman Risk Off ETN (NYSEArca: OFF) put in exchange-traded wrappers a basket of 35 securities including equities, commodities, currencies and fixed income that together amount to either risk-on or risk-off positions.
  • The two ETNs are essentially mirror images of each other. They are designed to mix assets that either rise or fall given a particular market outlook. For example, ONN features long positions in equities and short positions in bonds, while OFF shorts equities and goes long on bonds.
  • The funds target growing correlation among asset classes that has characterized the aftermath of the market collapse of 2008-2009. Indeed, the gnawing cycles of hope and anxiety surrounding the global economy has made outsized spikes and plunges the norm for almost three years. ONN and OFF mark the first time the asset management industry has designed products catered to the prevailing uncertainty.
  • The two ETNs bear the name of renowned macro traders Mark Fisher and Dennis Gartman, in part, because the two approached UBS with the risk-on/risk-off concept. The two are behind the Fisher-Gartman Risk Index.
  • ONN is a plain-vanilla long product, while OFF resets daily, an acknowledgment that markets historically fall a lot faster than they rise.
h/t AbnormalReturns for finding the original link

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