ETRACS 2xMonthly Pay Leveraged US Small Cap High Dividend ETN (SMHB)

Overview

The ETRACS 2xMonthly Pay Leveraged US Small Cap High Dividend ETN (SMHD) provides 2x leveraged exposure to the Solactive US Small Cap High Dividend Index, seeking enhanced monthly income. It targets US small-cap companies with high dividend yields, focusing on dividend income generation and total return.

Reputation and Reliability

The ETRACS ETNs are issued by UBS, a global financial services company with a generally solid reputation. However, ETNs carry the credit risk of the issuing bank.

Management Expertise

UBS's expertise lies in structuring and managing ETNs, leveraging established methodologies for tracking indices and managing leverage.

Goal

To provide 2x leveraged exposure to the monthly performance of the Solactive US Small Cap High Dividend Index, less financing costs and fees.

Investment Approach and Strategy

Strategy: The ETN employs a leveraged strategy, aiming to deliver twice the monthly return of the underlying Solactive index, before fees and expenses.

Composition The ETN does not directly hold assets. Its return is linked to the performance of the Solactive US Small Cap High Dividend Index through a debt obligation of UBS.

Market Share: SMHD's market share in the leveraged small-cap dividend ETN segment is relatively small.

Total Net Assets (AUM): 15226470

Key Competitors

• DVHL
• SDIV

Competitive Landscape

The leveraged small-cap dividend ETF/ETN market is competitive. SMHD offers high leverage, attracting risk-tolerant investors. However, its relatively small AUM and the credit risk associated with ETNs pose disadvantages compared to more established ETFs. Higher expense ratios can also be a disadvantage. The advantages of SMHD include the potential for higher returns with its 2x leverage.

Historical Performance: Historical performance can vary greatly due to the leveraged nature and small cap exposure. Consult financial resources for detailed historical data.

Benchmark Comparison: Performance is expected to be roughly twice the return of the Solactive US Small Cap High Dividend Index on a monthly basis, minus fees and expenses. Tracking error can occur.

Expense Ratio: 1.5

Average Trading Volume

SMHD's average trading volume is moderate, which can impact execution costs.

Bid-Ask Spread

The bid-ask spread for SMHD can be wider than more liquid ETFs, increasing trading costs.

Market Environment Factors

SMHD's performance is affected by interest rate fluctuations, small-cap market volatility, and dividend yields. Economic conditions affecting smaller companies are critical.

Growth Trajectory

SMHD's growth depends on investor appetite for leveraged products and small-cap high-dividend exposure. Changes to the underlying index methodology and financing rates also influence the growth trajectory.

Competitive Edge

SMHD's primary competitive edge is its 2x monthly leverage on the Solactive US Small Cap High Dividend Index, appealing to investors seeking high income and capital appreciation potential. This leverage magnifies both gains and losses. It provides a targeted exposure to small-cap companies with high dividend yields that can be easily traded. However, it is important to note the ETN structure comes with credit risk from the issuer.

Volatility

SMHD exhibits very high volatility due to its leveraged nature and exposure to small-cap stocks.

Market Risk

SMHD is subject to small-cap market risk, dividend cuts, changes in interest rates and the leveraged structure amplifies these risks, potentially leading to significant losses.

Ideal Investor Profile

SMHD is suitable for sophisticated investors with a high-risk tolerance and a short-term investment horizon, who understand the risks associated with leverage and ETNs.

Market Risk

SMHD is best suited for active traders or sophisticated investors with a short-term focus due to the risks and costs associated with leveraged ETNs.

SMHD offers 2x leveraged exposure to US small-cap high dividend stocks, targeting high monthly income. Its leveraged structure makes it a high-risk, high-reward investment suitable for short-term, sophisticated traders. Investors should understand the potential for significant losses and the credit risk associated with the ETN. It's not suitable for long-term, risk-averse investors due to its volatility and leveraged nature. Before investing, consider the higher expense ratio and potential for tracking error.

Data Sources:

• UBS ETRACS Website
• Solactive Index Website
• ETFdb.com
• Seeking Alpha

Disclaimers:

The data provided is for informational purposes only and should not be considered financial advice. Investing in leveraged ETNs involves significant risks, including potential loss of principal. Past performance is not indicative of future results.