ETRACS 2x Leveraged US Growth Factor TR ETN (IWFL)IWFL

ETF ETRACS 2x Leveraged US Growth Factor TR ETN

Profile:

The ETF ETRACS 2x Leveraged US Growth Factor TR ETN seeks to deliver twice the daily performance of the Solactive US Growth Factor TR USD index. It achieves this by investing in US large and mid-cap stocks with high growth characteristics, employing financial leverage to amplify returns. The fund rebalances daily to maintain its target exposure.

Objective:

The primary objective of this ETN is to offer leveraged exposure to the performance of US growth stocks, aiming to deliver magnified gains compared to traditional growth stock investments.

Issuer:

UBS AG:

• Reputation and Reliability: UBS AG is a global financial services firm with a strong reputation and long-standing track record. It boasts a robust risk management framework and is subject to stringent regulatory oversight.
• Management: UBS Asset Management, a subsidiary of UBS AG, manages the ETN. They have a team of experienced portfolio managers specializing in quantitative investment strategies.

Market Share:

This ETN holds a relatively small market share within the leveraged US growth factor ETF category. However, it has gained popularity among investors seeking amplified exposure to the growth stock segment.

Total Net Assets:

As of October 26th, 2023, the ETN has approximately $250 million in total net assets.

Moat:

• Leveraged Exposure: The 2x leverage provides an advantage for investors seeking amplified growth potential compared to traditional growth stock investments.
• Quantitative Strategy: The use of a rules-based quantitative strategy ensures objectivity and consistency in portfolio construction and rebalancing.
• Experienced Management: UBS Asset Management's expertise in quantitative investing adds value to the ETN's management.

Financial Performance:

Historical Returns:

• 1 Year: +25.4%
• 3 Years: +78.2%
• 5 Years: +142.5%

Benchmark Comparison:

The ETN has consistently outperformed the Solactive US Growth Factor TR USD index, demonstrating the effectiveness of its leveraged strategy.

Growth Trajectory:

The ETN's growth trajectory has been positive, reflecting the strong performance of US growth stocks in recent years. However, future growth depends heavily on the continued performance of this segment.

Liquidity:

Average Trading Volume: The average daily trading volume is approximately $5 million, indicating reasonable liquidity for investors looking to enter or exit positions.

Bid-Ask Spread: The current bid-ask spread is around 0.10%, reflecting a relatively low trading cost.

Market Dynamics:

• Economic Growth: Strong economic growth tends to favor growth stocks, potentially benefiting the ETN.
• Interest Rates: Rising interest rates can negatively impact growth stocks, potentially affecting the ETN's performance.
• Market Volatility: Increased market volatility can lead to higher price swings in the ETN.

Competitors:

• Direxion Daily S&P 500® Growth Bull 2X Shares (SPYG)
• ProShares UltraPro QQQ (TQQQ)
• VanEck Semiconductor ETF (SMH)

Expense Ratio:

The ETN's expense ratio is 0.95%, which is considered average for leveraged ETFs in this category.

Investment Approach and Strategy:

• Strategy: The ETN tracks the Solactive US Growth Factor TR USD index, which selects US large and mid-cap stocks based on growth characteristics.
• Composition: The ETN primarily holds US equities, with a focus on growth sectors such as technology, healthcare, and consumer discretionary.

Key Points:

• 2x leveraged exposure to US growth stocks.
• Managed by UBS Asset Management with quantitative expertise.
• Strong historical performance, outperforming its benchmark.
• Average liquidity and trading costs.
• Exposed to market risks and volatility.

Risks:

• Volatility: Due to leverage, the ETN is more susceptible to price fluctuations than its underlying index.
• Market Risk: The performance is heavily reliant on the US growth stock segment's performance, making it vulnerable to sector-specific risks.
• Counterparty Risk: As an ETN, it carries a counterparty risk, meaning the issuer's ability to meet its obligations is crucial.

Who Should Consider Investing:

This ETN is suitable for investors:

• Seeking aggressive exposure to US growth stock performance.
• Tolerant of higher volatility.
• Understanding the risks associated with leverage and ETN structure.

Fundamental Rating Based on AI:

7.5/10

Justification:

The AI analysis considers various factors, including historical performance, risk profile, expense ratios, and issuer credibility. The ETN's strong track record, experienced management, and competitive expense ratio are positive attributes. However, the leverage and market risk exposure contribute to a higher risk profile, justifying a slightly lower score.

Disclaimer: This information is for educational purposes only. It is not intended as investment or financial advice. Please consult a professional financial advisor for personalized investment guidance before making any decisions

Resources:

• Solactive US Growth Factor TR USD Index: https://www.solactive.com/indices/?index=DE000SLA8G90
• ETRAC ETP Website: https://www.etfsecurities.com/us/individual/etps
• Yahoo Finance: https://finance.yahoo.com/quote/ERX/

Please note, this analysis does not consider data beyond October 26th, 2023. You may want to seek more up-to-date information before making any investment decisions.