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Libor ETFs - Global ETF Monitor - 18th August 2017 | Ultumus

Written by Ultumus | 26 January 2020

Americas

There really is an ETF for everything.
Libor, the major global interest rate benchmark, was discredited in 2012 by a manipulation scandal, which climaxed with then-Barclays CEO Bob Diamond resigning. The legal fallout continues to date.

Nonetheless, there is a new ETN aiming to track Libor.


American issuer Janus Henderson has listed two new Libor ETNs today carrying the VelocityShares brand: VelocityShares Short Libor (DLBR) and VelocityShares Long Libor (ULBR).

Both products are ETNs not ETFs, meaning they’re structured as unsecured bank debts. The bank counterparty is Citigroup. How do they work? Well, with difficulty because Libor is not something that can be directly invested in.

To simplify, ULBR tracks a “hypothetical short position” in Eurodollar futures contracts. That position is then adjusted daily to reflect changes in the LIBOR rate over the day.

DLBR, again to simplify, tracks a “hypothetical long position”, where that position is adjusted daily to give the inverse of the percentage change in the LIBOR rate that next day.

Filed documents suggest that ULBR and DLBR’s performance will be a day behind movements in the Libor rate. Both ETNs charge 1.5% fees. For the filed documents and full explanation, see here:
https://www.sec.gov/Archives/edgar/data/200245/000095010317005855/dp77433_424b2-liboretns.htm

Europe

Things are a bit easier in Europe.

In Switzerland, db x-trackers will be cross-listing a developing countries bond ETF, the Emerging Sovereigns Quality Weighted ETF (XQUE). XQUE tracks debts issued by governments in developing countries. XQUE is “quality weighted”, meaning the bonds it buys are determined by how good the countries’ economic fundamentals are. Thus if Turkey has good economic fundamentals, XQUE will buy Turkish bonds. If Hungary has weaker economic fundamentals it will buy fewer Hungarian bonds. (These are examples).

Further notice:

First Trust has renamed its S&P 500 VIX Tail Hedge Fund to First Trust Dorsey Wright People’s Portfolio ETF. Its new ticker will be DWPP.