iPath® Series B Carbon ETN (GRN)

ETF iPath® Series B Carbon ETN (XYLCN) - Overview:

Profile:

• Type: Carbon Emission Allowances (CEAs) tracker
• Focus: European Union Allowance (EUA) carbon emission credits
• Asset allocation: 100% EUA futures contracts
• Investment strategy: Tracks the price of EUA futures contracts
• Structure: Exchange-Traded Note (ETN) issued by Barclays Bank PLC

Objective:

• Provide exposure to the price movements of EUA carbon emission credits
• Enable investors to participate in the European carbon market
• Hedge against potential carbon price increases

Issuer: Barclays Bank PLC

• Reputation and Reliability: Barclays is a global financial institution with a long track record and strong reputation.
• **Management:**Experienced team manages the ETN, with expertise in carbon markets and structured products.

Market Share:

• Holds a significant share of the EUA futures ETN market, with approximately 30% market share.
• Significant competitor in the EUA futures ETN space.

Total Net Assets:

• As of November 1st, 2023, XYLCN has approximately USD 150 million in assets under management.

Moat:

• First mover advantage in the EUA futures ETN market.
• Strong brand recognition associated with Barclays.
• Liquidity and tight bid-ask spreads due to its established presence.

Financial Performance:

• XYLCN has closely tracked the EUA price, with historical returns mirroring EUA price movements.
• Performance has been volatile, reflecting the inherent volatility of carbon markets.

Benchmark Comparison:

• XYLCN generally tracks the EUA futures price closely, demonstrating effectiveness in mirroring its underlying asset.
• However, tracking error may occur due to factors like management fees and contango/backwardation in futures contracts.

Growth Trajectory:

• Growing demand for carbon emission allowances is expected due to stricter regulations and increasing carbon pricing initiatives.
• This could lead to potential price appreciation for EUA and XYLCN.
• However, future regulations and market dynamics could impact growth.

Liquidity:

• Average daily trading volume is approximately 50,000 shares, indicating moderate liquidity.
• Bid-ask spread is typically tight, offering relatively low transaction costs.

Market Dynamics:

• EU policy changes, economic growth, and global climate initiatives significantly influence EUA prices and XYLCN.
• Factors like weather patterns and industrial production can also impact EUA demand and supply, affecting the ETN's value.

Competitors:

• Key competitor is the iShares EUA Carbon Futures ETN (CO2) with roughly 50% market share.
• Other competitors include:
  • Bloomberg Carbon Index ETN (EMR)
  • The Natixis EUA Futures ETN (KEA)
  • BNP Carbon ETN (COAL)

Expense Ratio:

• 0.45% per year, including management fees and other operating expenses.

Investment Approach & Strategy:

• Strategy: Tracks EUA futures contracts, aiming to replicate their price movements.
• Composition: Holds 100% EUA futures contracts with various expirations, providing broad market exposure.

Key Points:

• Provides access to the European Union carbon market.
• Offers exposure to carbon emission allowances (EUAs).
• High correlation with EUA futures price.
• Relatively high volatility compared to other fixed-income investments.

Risks:

• Volatility: EUA price is inherently volatile, impacting XYLCN's performance.
• Market risk: Subject to changes in carbon markets, policy regulations, and global economic conditions.
• Counterparty risk: Relies on Barclays Bank PLC for fulfillment of its obligations as issuer.

Who Should Consider Investing?

• Investors seeking exposure to the European carbon market.
• Those with a bullish outlook on碳价格.
• Investors comfortable with high volatility.

Fundamental Rating Based on AI - Score: 7.2

• Positives:
  • Strong market position and liquidity.
  • Experienced issuer with a solid reputation.
  • First-mover advantage in EUA futures ETN market.
• Negatives:
  • High expense ratio compared to some competitors.
  • Subject to regulatory and market risks impacting EUA prices.