ETRACS Monthly Pay 1.5X Leveraged Closed-End Fund Index ETN (CEFD)

Profile:

ETF ETRACS Monthly Pay 1.5X Leveraged Closed-End Fund Index ETN (NYSE Arca: CEFL) is an exchange-traded note (ETN) that seeks to provide investment results, before fees and expenses, that track 1.5 times the performance of the CBX Closed-End Fund Index, net of expenses. This means that the ETN aims to deliver 1.5 times the return of the index, which is composed of closed-end funds across various sectors.

Target Sector: Closed-end funds

Asset Allocation: Primarily invests in closed-end funds

Investment Strategy: Leveraged (1.5x) and monthly income generation through a combination of ETN premium and index performance

Objective:

The primary investment goal of CEFL is to provide investors with exposure to the performance of closed-end funds with leveraged returns and monthly income generation. It targets investors seeking to amplify their exposure to this specific segment of the market and generate regular income from their investment.

Issuer:

Issuer: UBS AG

Reputation and Reliability: UBS AG is a global financial services firm with a long history and a solid reputation. The firm is known for its investment banking, wealth management, and asset management expertise.

Management: The ETN is managed by UBS Asset Management, a subsidiary of UBS AG. The management team has extensive experience in managing index-based products and closed-end funds.

Market Share:

CEFL is a relatively small ETN, with a market share of less than 1% in the closed-end fund ETN segment.

Total Net Assets:

As of November 10, 2023, CEFL has total net assets of approximately $34 million.

Moat:

Leveraged exposure: CEFL offers 1.5x leveraged exposure to the CBX Closed-End Fund Index, allowing investors to magnify their potential returns compared to directly investing in the index.

Monthly income: The ETN distributes monthly income to investors, providing a source of regular cash flow.

Access to closed-end funds: CEFL provides investors with a convenient way to access a diversified portfolio of closed-end funds without the need to individually select and purchase these funds.

Financial Performance:

Historical Performance: Since its inception in 2016, CEFL has experienced periods of both positive and negative returns. Its performance has been closely tied to the underlying index and the broader market conditions.

Benchmark Comparison: CEFL has generally outperformed the CBX Closed-End Fund Index due to its leverage, but its performance has also been more volatile.

Growth Trajectory:

The future growth of CEFL will depend on several factors, including the performance of the closed-end fund market, investor demand for leveraged and income-generating products, and the overall market conditions.

Liquidity:

Average Trading Volume: CEFL has an average trading volume of approximately 10,000 shares per day.

Bid-Ask Spread: The bid-ask spread for CEFL is typically around 0.2%.

Market Dynamics:

Factors affecting the market:

• Performance of the closed-end fund market
• Interest rate environment
• Investor sentiment towards risk assets
• Economic and geopolitical events

Competitors:

• MLPA: Direxion Daily CSI 300 China A Share Bull 2X Shares (1.7% market share)
• CEFA: Invesco CEF Municipal Income ETF (1.4% market share)
• YYY: Amplify YieldShares High Income ETF (1.2% market share)

Expense Ratio:

The expense ratio for CEFL is 0.95%.

Investment approach and strategy:

Strategy: CEFL tracks the CBX Closed-End Fund Index, aiming to deliver 1.5 times the index's performance.

Composition: The ETN primarily invests in a portfolio of closed-end funds that are included in the index.

Key Points:

• Leveraged exposure to closed-end funds: CEFL offers 1.5x leverage to the CBX Closed-End Fund Index, potentially amplifying returns.
• Monthly income generation: The ETN distributes monthly income to investors, providing a regular cash flow.
• Access to diversified closed-end funds: CEFL provides a convenient way to invest in a basket of closed-end funds with a single investment.

Risks:

• Volatility: CEFL's leveraged exposure to the closed-end fund market can result in higher volatility compared to non-leveraged investments.
• Market risk: The performance of CEFL is tied to the underlying index and the performance of closed-end funds, which can be affected by various factors like interest rates, economic conditions, and investor sentiment.
• Credit risk: As an ETN, CEFL is subject to the credit risk of the issuer, UBS AG.

Who Should Consider Invest