ETRACS 2x Leveraged US Dividend Factor TR ETN (SCDL)

ETF ETRACS 2x Leveraged US Dividend Factor TR ETN: An Overview

Profile:

The ETRACS 2x Leveraged US Dividend Factor TR ETN is an exchange-traded note (ETN) designed to provide leveraged exposure to the performance of the Solactive US High Dividend Factor Index. This index tracks US stocks with high dividend yields and a value tilt. The ETN uses a two-times leverage strategy, aiming to deliver double the daily performance of the index.

Objective:

The primary investment goal of the ETN is to offer investors a magnified way to access the potential returns of the US high-dividend, value-oriented stock market. It seeks to provide capital appreciation through exposure to dividend-paying stocks and amplified returns through leverage.

Issuer:

The ETN is issued by UBS AG, a leading global financial services company with a long-standing reputation and track record in the financial markets. UBS's asset management arm has extensive experience in managing various investment products, including ETFs and ETNs.

Market Share:

The ETRACS 2x Leveraged US Dividend Factor TR ETN holds a relatively small market share within its sector. However, it stands out due to its unique leveraged approach to dividend-focused investing.

Total Net Assets:

As of November 17, 2023, the ETN has approximately $54.44 million in total net assets.

Moat:

The ETN's competitive advantages include:

• Leveraged exposure: The 2x leverage strategy amplifies potential returns, aiming for higher gains than traditional dividend-focused ETFs.
• Target index: The Solactive US High Dividend Factor Index focuses on stocks with high dividend yields and value characteristics, potentially providing a more resilient portfolio during market downturns.
• Issuer reputation: UBS AG is a well-established and trusted financial institution with expertise in managing investment products.

Financial Performance:

The ETN's historical performance has been volatile, reflecting the leverage employed and the underlying index's performance. It has outperformed the broader market in certain periods but also experienced significant drops during market corrections.

Benchmark Comparison:

The ETN has generally outperformed the S&P 500 index on a risk-adjusted basis, indicating its potential to generate higher returns with amplified volatility.

Growth Trajectory:

The ETN's growth trajectory is influenced by factors like market sentiment towards high-dividend stocks, economic conditions, and interest rate fluctuations. The increasing popularity of dividend investing and the focus on value stocks could potentially benefit the ETN in the long run.

Liquidity:

The ETN enjoys average daily trading volume, ensuring sufficient liquidity for investors to enter and exit positions. The bid-ask spread is relatively tight, indicating low transaction costs.

Market Dynamics:

Factors affecting the ETN's market environment include economic growth, interest rate policies, and investor sentiment towards dividend-paying stocks and value investing.

Competitors:

• SPDR S&P Dividend ETF (SDY): 0.46% expense ratio, $22.66 billion in AUM, tracks S&P High Yield Dividend Aristocrats Index.
• iShares Core Dividend Growth ETF (DGRO): 0.07% expense ratio, $57.10 billion in AUM, tracks Morningstar US Dividend Growth Index.
• Vanguard High Dividend Yield ETF (VYM): 0.06% expense ratio, $44.76 billion in AUM, tracks FTSE High Dividend Yield Index.

Expense Ratio:

The ETN's expense ratio is 0.95%, which includes management fees and other operating expenses.

Investment Approach and Strategy:

• Strategy: The ETN tracks the Solactive US High Dividend Factor Index, aiming to maximize daily investment results that correspond to twice the performance of the index.
• Composition: The ETN invests in a portfolio of US stocks with high dividend yields and value characteristics, replicating the index holdings.

Key Points:

• Leverages the performance of high-dividend, value-oriented US stocks.
• Aims for double the daily return of the underlying index.
• Managed by UBS AG, a reputable financial institution.
• Offers higher potential returns with amplified volatility.
• Suitable for investors seeking magnified exposure to dividend-paying stocks and willing to tolerate higher risk.

Risks:

• Volatility: The leveraged strategy can amplify market movements, leading to significant fluctuations in the ETN's value.
• Market risk: The ETN's performance is tied to the underlying index, which can be affected by various market factors.
• Counterparty risk: As an ETN, it is subject to the credit risk of the issuer, UBS AG.

Who Should Consider Investing:

This ETN is suitable for investors with:

• High-risk tolerance
• Long-term investment horizon
• Seeking amplified exposure to dividend-paying stocks
• Understanding of leverage and its associated risks

Fundamental Rating Based on AI:

Based on an AI-based analysis of various factors, including financial health, market position, and future prospects, the ETRACS 2x Leveraged US Dividend Factor TR ETN receives a Fundamental Rating of 7 out of 10.

Justification:

The ETN benefits from a strong issuer, a unique leveraged approach, and potential for higher returns. However, the amplified volatility and underlying index risks demand careful consideration. Investors seeking short-term gains or with low-risk tolerance should approach this ETN with caution.

Resources and Disclaimers:

• UBS ETF website: https://www.ubs-am.com/us/en/financial-intermediaries/etfs/product-library/etn/us/098178K95
• Solactive US High Dividend Factor Index: https://www.solactive.com/indices/equity/solactive-us-high-dividend-factor-index/

Disclaimer:

This information is intended for educational purposes only and should not be considered investment advice. Please consult with a qualified financial advisor before making any investment decisions.