Bloomberg News

UBS Offers Exchange-Traded Note Tied to Dividend Securities

September 19, 2013

UBS AG (UBS:US) is offering an exchange-traded note tied to an index of dividend-yielding securities, the latest linking to companies that periodically distribute profits to investors.

The ETRACS Diversified High Income ETN (DVHI:US), which started trading today under the ticker DVHI, pays a coupon based on the performance of companies in the NYSE Diversified High Income Index, according to a prospectus filed with the U.S. Securities and Exchange Commission. The gauge, created on Aug. 20, tracks 138 publicly traded securities, including stocks, real estate investment trusts, and master-limited partnerships that “typically pay high dividends,” according to the document.

Megan Stinson, a spokeswoman for the bank in New York, declined to comment.

ETNs tied to companies that pay a portion of surplus cash to shareholders have been popular in the U.S., according to data compiled by Bloomberg.

Barclays Plc worked with billionaire Ken Fisher’s Fisher Asset Management LLC to create a security tied to dividend-yielding stocks in May. That note is the 18th largest in the U.S., with $254.9 million, after four months, Bloomberg data show.

The largest ETN, JPMorgan Chase & Co.’s Alerian MLP Index (AMJ:US) note, links to coupon-paying MLPs, according to offering documents filed with the Securities and Exchange Commission. It has about $5.6 billion in assets, Bloomberg data show.

For the new ETRACS ETN, UBS charges 0.07 percent of the coupon in monthly fees and a 0.125 percent redemption fee, according to the prospectus. The coupon may be considered taxable as ordinary income, while increases in the principal may be taxed at the typically lower capital gains rate if the note is held for more than a year.

UBS, Switzerland’s largest bank, offers 29 other U.S. ETNs, Bloomberg data show. The lender last offered an ETRACS ETN in October last year, according to the data. The security yields twice the gains and losses of an index of mortgage real estate investment trusts.

To contact the reporter on this story: Kevin Dugan in New York at kdugan4@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net


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Companies Mentioned

  • UBS
    (UBS AG)
    • $16.45 USD
    • 0.11
    • 0.67%
  • DVHI
    (ETRACS Diversified High Income ETN)
    • $25.7 USD
    • 0.00
    • 0.0%
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