Print this pageiPath Leveraged ETNs
iPath Leveraged ETNs are designed to provide investors with a leveraged return that is linked to the performance, or inverse performance, of a market benchmark less applicable charges, costs and fees. Each iPath Leveraged ETN has an intraday indicative note value ("IINV"), which is meant to approximate the intrinsic economic value of each iPath Leveraged ETN at any point in time.
The IINV will be calculated by the calculation agent on an ongoing basis from the initial valuation date to the final valuation date. During the hours on which trading is generally conducted on NYSE Arca, NYSE Arca or a successor will calculate and publish the IINV for each iPath leveraged ETN every 15 seconds under the applicable ticker symbol. Additionally, a closing indicative note value (CINV) for each iPath Leveraged ETN will be published by NYSE Arca on each valuation date under the applicable ticker symbol. For a more complete description of how the IINV and CINV are calculated for each series of iPath leveraged ETNs, please see the relevant prospectus.
Indicative value for iPath Leveraged ETNs
Unlike some leveraged investments, the iPath Leveraged ETNs do not track a fixed multiple of the daily or monthly performance of an underlying index. Instead, on any given day the indicative value of any series of iPath Leveraged ETNs will change by a multiple of the underlying index performance that is variable and depends, in part, on the then current IINV of that series of iPath Leveraged ETNs.
In order to allow investors to monitor the ratio of percentage daily changes in the IINV to daily index percentage returns, NYSE Arca will calculate and publish every 15 seconds a "participation" for each series iPath Leveraged ETNs. For each series of iPath Leveraged ETNs, the participation is calculated by dividing the amount per ETN that is notionally exposed to the underlying index by the then current IINV of that ETN. The participation is published intraday to common data providers such as Bloomberg, and once per day to this website. View now.
Automatic redemption
In order to prevent the ETNs from reaching a negative value, there will be an automatic redemption of any series of the iPath Leveraged ETNs if, on any calendar day prior to or on the final valuation date, the intraday indicative note value (IINV) is less than or equal to the applicable automatic termination level specified below per ETN. Upon the occurrence of an automatic termination event, investors in that series of iPath leveraged ETNs will receive a redemption amount that will be significantly less than the issue price and will receive no greater than the automatic termination level specified below per ETN. Accordingly, investors may lose some or all of their principal if they invest in the iPath leveraged ETNs. Please refer to the relevant prospectus for further details on the automatic redemption, timing and processes, and how the payment upon redemption is calculated.
Fees for iPath Leveraged ETNs
As the iPath Leveraged ETNs seek to replicate a long or short investment in an underlying index, certain charges, costs and fees are built into the calculation of the CINV and the IINV.
- The iPath Long Leveraged ETNs charge an annualized investor fee and an annualized financing charge on notional cash amounts underlying each iPath Long Leveraged ETN¹. The notional cash amounts of the iPath Long Leveraged ETNs will vary according to the financing rate and fee rate, both as defined in the applicable prospectus.
- The iPath Short Leveraged ETNs charge an annualized investor fee and an annualized index borrow cost on the notional borrowed equity amounts underlying each iPath Short Leveraged ETN (offset by annualized interest on notional cash amounts underlying each iPath Short Leveraged ETN). The notional borrowed equity amounts of the iPath Short Leveraged ETNs will vary according to movements in the underlying index, as defined in the applicable prospectus, and will not in general move in tandem with the underlying index or the IINV or CINV.
Therefore, under certain circumstances, particularly where the financing level is a high multiple of the applicable CINV, the fees may represent a significant percentage of the applicable CINV.
For full details of the accrued fees, charges and costs for the iPath Leveraged ETNs, and hypothetical examples as to how these can affect the performance of the ETNs, investors should consult the applicable prospectus.
Differences and Similarities Between iPath Leveraged ETNs and Leveraged exchange traded funds (Leveraged ETFs)
Both iPath Leveraged ETNs and leveraged ETFs provide investors with access to the leveraged returns of various market benchmarks. However, the iPath Leveraged ETNs are senior, unsecured debt securities issued by Barclays Bank PLC, whereas ETFs are typically registered investment companies and are collateralized by an underlying portfolio of securities.
iPath Leveraged ETNs seek to provide investors with an alternative to leveraged ETFs, which typically track a daily or monthly multiple of an index's returns. Instead, the iPath Leveraged ETNs track a fixed multiple of underlying index performance over the term of the ETNs. Other differences and similarities are noted in the following chart:
iPath Leveraged ETNs |
Leveraged ETF |
|
| Leveraged Performance | Yes | Yes |
| Liquidity | Daily on Exchange | Daily on Exchange |
| Registration | Securities Act of 1933 | Investment Company Act of 1940 |
| Form | Medium-Term Note | 40 Act Fund / UIT |
| Principal risk | Market and issuer risk | Market risk |
| Recourse | Issuer credit | Portfolio of Securities |
| Performance Target | Payment at Maturity | Daily or Monthly Performance Target |
| Maturity | Fixed Maturity² | No |
| Path Dependency³ | No | Yes |
| Institutional size redemption | Daily to the issuer² | Daily via custodian |
| Formulaic Optional Redemption Value | Yes² | No |
| Automatic Termination Event | Yes | No |
¹ Because the daily investor fee accrues as part of the financing level and the daily financing charge is calculated on the basis of the financing level, a portion of the daily financing charge will reflect the incremental increase of the financing level attributable to the accrued daily investor fee.
² Subject to the occurrence of an automatic termination event or early redemption by the investor.
³ An index-linked security shows 'path dependency' if its value on any given day cannot be derived from the current and initial values of its underlying index but instead is dependent on the historical 'path' that the index has taken over the calculation period.
Diversification may not protect against market risk.
