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Fisher Asset Holds $1.4 Billion of ETNs in Second Notes Foray

Thursday, 08 Aug 2013 02:44 PM

Fisher Asset Management LLC holds about $1.4 billion of two exchange-traded notes issued in May, its second large foray into structured investments in the past 15 months.

The firm, owned by billionaire Chief Executive Officer Ken Fisher, owns 97 percent of shares in FI Enhanced Global High Yield ETN and 95 percent of those in FI Enhanced Europe 50 ETN, according to a July 16 filing with the U.S. Securities and Exchange Commission and data compiled by Bloomberg. Barclays Plc issued both securities.

The notes, which are tied to stocks, account for about half of all new assets for U.S. ETNs this year, Bloomberg data show. Fisher also bought $946.2 million of one-year structured securities tied to the Russell 1000 Growth Index on May 16, 2012, which was the biggest equity-tied offering in the U.S. since at least 2010.

“The advantage of the notes for us is added exposure to global, big-capitalization growth companies in a vehicle that efficiently accommodates inflows and outflows,” said David Eckerly, group vice president of corporate communications for the Woodside, California-based firm. Fisher worked with Barclays to “construct” the securities, he said.

The Russell 1000-linked notes, issued by UBS AG, yielded twice the gains and losses of a total return version of the index, which jumped 23 percent over the year. They matured on May 28, about a week after the two Barclays ETNs were sold.

Leveraged Notes

The FI Enhanced Global High Yield ETN, which trades under the ticker FIGY, is already the fourth-largest exchange-traded note in the U.S. by assets with $1.18 billion, Bloomberg data show. The securities initially yield twice the gains of the MSCI World High Dividend Yield USD Gross Total Return Index, a benchmark of global stocks that pay dividends, according to a prospectus filed with the SEC.

The FI Enhanced Europe 50 ETN, trading under FEEU, had $317.7 million in assets as of yesterday, Bloomberg data show. It starts out yielding twice the gains and losses of the Stoxx Europe 50 USD (Gross Return) Index, a benchmark of 50 of the largest European companies, according to a prospectus filed with the SEC.

The leverage factor for both notes can change with their performance, according to offering documents. That “should be beneficial for longer-run performance,” Eckerly said.

ETNs are “well-suited for bespoke solutions for clients,” said Francesco Mazzini, assistant vice president of ETN structuring at Barclays in New York. “If a client has a specific need, we might be able to provide it in a few weeks for them.”

Mark Lane, a spokesman for the bank in New York, declined to comment on Fisher’s investment in the securities.

ETN Assets

Total assets for U.S. exchange-traded notes rose to $20.5 billion this year as of yesterday, Bloomberg data show. That’s an increase of 27 percent from the $16.1 billion at the end of 2012, according to data from BlackRock Inc., which tracks the market.

Banks create structured notes by packaging debt with derivatives to offer customized bets to retail investors while earning fees and raising money. Derivatives are contracts with values derived from stocks, bonds, commodities and currencies, or events such as changes in interest rates or the weather.

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Fisher Asset Management LLC holds about $1.4 billion of two exchange-traded notes issued in May, its second large foray into structured investments in the past 15 months.
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2013-44-08
Thursday, 08 Aug 2013 02:44 PM
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