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Credit Suisse Launches Merger ETN
March 11, 2011
SAN DIEGO (ETFguide.com) – While exchange-traded funds (ETFs) continue to get most of the headlines, the roster of exchange-traded notes (ETNs) is quietly growing.
Credit Suisse unveiled the 2x Monthly Leveraged Credit Suisse Merger Arbitrage Liquid Index ETN (NYSEArca: CSMB) which aims to capture any spread between the price at which a stock targeted for a buyout trades after a proposed acquisition and the price the purchasing company has agreed to pay for the targeted company. Potential gains are realized when deals are completed whereas potential losses occur when deals fall through.
CSMB is benchmarked to the Credit Suisse Merger Arbitrage Liquid Index with double monthly leverage. The index attempts to employ a merger arbitrage strategy by using a quantitative methodology to track a dynamic basket of securities held as long or short positions and cash weighted in accordance with the index rules to reflect publicly announced merger transactions that meet certain qualifying conditions.
Credit Suisse, like Barclays Bank, JP Morgan Chase, and other banks, has joined the ETN race by launching products linked to proprietary products. At the end of February, there were 135 U.S. listed ETNs with $15.99 billion in assets.
ETNs are debt instruments tied to the performance of an index, a currency or securities. Unlike ETFs they carry credit risk of the issuing bank or financial institution.
CSMB’s annual fees are 0.55% plus an additional cost of 0.95% for leverage.
Credit Suisse also offers an unleveraged version of its merger strategy in the Credit Suisse Merger Arbitrage Liquid ETN (NYSEArca: CSMA). |
