Bank of America Merrill Lynch and ETF Securities launch first ETF linked to European equity volatility
25/05/11
LONDON - Bank of America Merrill Lynch, in conjunction with ETF Securities, has launched the first Exchange Traded Fund (ETF) linked to European equity volatility, listed on the London Stock Exchange. The
ETFX-BofAML IVSTOXX ETF is linked to the EURO STOXX 50 Investable Volatility Index (the Investable VSTOXX, or IVSTOXX), an investable index which reflects the implied volatility of the EURO STOXX 50.
In contrast to other existing index products, which are not directly tradable, the IVSTOXX is directly replicable through a portfolio of listed EURO STOXX 50 options and therefore benefits from the liquidity available in the listed options market. The IVSTOXX is calculated independently by STOXX Limited. The index is linked to medium-term forward volatility, which has historically provided efficient access to volatility as an asset class.
Equity market volatility has consistently demonstrated a high degree of negative correlation with equity returns, particularly when equity markets are falling. An allocation to volatility as an asset class may therefore provide investors with diversification benefits when they need it most. The ETFX-BofAML IVSTOXX ETF allows investors to access this diversification and tail risk protection in a highly liquid format, through a single, listed instrument.
Michael Ward, head of EMEA Derivatives Sales and Cash Sales Trading, at Bank of America Merrill Lynch, commented: "Investors are increasingly becoming aware of the potential benefits of an exposure to volatility as a component of a diversified portfolio. The EURO STOXX 50 Investable Volatility Index makes it easy for our clients to access and trade European volatility as an asset class through a liquid and transparent index product. Offering this index as an exchange-traded fund makes it accessible to more investors; in addition, as this product is issued by a UCITS compliant platform it also benefits from reduced counterparty exposure risk having met the stringent UCITS requirements."
Mark Weeks, CEO of ETF Exchange, commented: "ETF Securities is pleased to be working with Bank of America Merrill Lynch on the launch of the ETFX-BofAML IVSTOXX ETF. Bank of America Merrill Lynch is well positioned to provide investors with access to new market opportunities and strategies. This effort marks an important step in ETF Exchange's evolution as an issuer of specialist exchange traded funds."
Hartmut Graf, CEO of STOXX Limited, commented: "We have seen the interest in volatility as an asset class grow tremendously over the past years. The EURO STOXX 50 Investable Volatility Index is an innovative approach to measure the market's sentiment about economic uncertainty; and offers the benefits of a transparent, rules based methodology to those market participants seeking to include volatility in their portfolio."
Product Summary
| Product name |
ETFX-BofAML IVSTOXX ETF |
| Bloomberg Ticker |
VSTX |
| Fund and trading currency |
EUR |
| Total Expense Ratio |
0.80% per annum |
| Listing |
London Stock Exchange |
| Listing Date |
28 February 2011 |
| Index Name |
EURO STOXX 50 Investable Volatility Index |
| Index Ticker |
IVSTOXX |
| Domicile |
Ireland |
| Authorised Participant |
Merrill Lynch International |
| Swap Counterparty |
Merrill Lynch International Bank Ltd |
Bank of America Merrill Lynch:
Bank of America is one of the world's largest financial institutions, serving individual consumers, small- and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 57 million consumer and small business relationships with more than 5,800 retail banking offices and approximately 18,000 ATMs and award-winning online banking with 29 million active users. Bank of America is among the world's leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 4 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations in more than 40 countries. Bank of America Corporation stock (NYSE: BAC) is a component of the Dow Jones Industrial Average and is listed on the New York Stock Exchange.
Bank of America Merrill Lynch is the marketing name for the global banking and global markets businesses of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., member FDIC. Securities, strategic advisory, and other investment banking activities are performed globally by investment banking affiliates of Bank of America Corporation ("Investment Banking Affiliates"), including, in the United States, Merrill Lynch, Pierce, Fenner & Smith Incorporated, which is a registered broker-dealer and a member of FINRA and SIPC, and, in other jurisdictions, locally registered entities. Investment products offered by Investment Banking Affiliates: Are Not FDIC Insured * May Lose Value * Are Not Bank Guaranteed.
www.baml.com
About ETF Securities:
ETF Securities (ETFS) is a provider of Exchange Traded Commodities (Commodity ETCs), Exchange Traded Currencies (Currency ETCs) and 3rd generation Exchange Traded Funds (ETFs). The management of ETF Securities pioneered the development of commodity ETPs, with the world's first listing of a commodity ETP, Gold Bullion Securities in Australia and London in 2003, and then the world's first commodity ETP platform which was first listed on the London Stock Exchange in September 2006.
ETFS Exchange Traded Products (ETPs) provide investors with a wide variety of investment strategies, with ETPs offering exposure to resource equities, physical, long, forward, leveraged and short exposure to all commodity sectors and G10 Currencies.
ETPs are simple to access as they are traded in up to five currencies (EUR, USD, GBP, AUD and JPY) and listed on up to nine major exchanges globally including the London Stock Exchange, the New York Stock Exchange, the Tokyo Stock Exchange, NYSE-Euronext Paris, NYSE-Euronext Amsterdam, Deutsche Borse, Borsa Italiana, the Australian Securities Exchange and the Irish Stock Exchange.
As at end January 2011, ETF Securities' assets under management totalled US$25.0 bn.
ETF Exchange (ETFX) ETFX the world's first third generation ETF platform; this comprises of a consortium of large banks to act as authorised participants and swap providers. The consortium of banks consist of Bank of America Merrill Lynch, Barclays Capital, Citi and Rabobank International. The idea of 3rd generation ETFs was inspired by investor demands for increased levels of transparency, liquidity and counterparty risk management. ETF Securities identified that the current ETF issuance model by single financial institutions could be strengthened by diversifying index replication across a consortium of the strongest financial players and concentrating liquidity within a single platform issued by an independent ETF issuer - hence the 3rd generation ETFX platform was born.
About STOXX Limited:
STOXX Ltd. is a global index provider, currently calculating a global, comprehensive index family of over 3,700 strictly rules-based and transparent indices. Best known for the leading European equity indices EURO STOXX 50, STOXX Europe 50 and STOXX Europe 600, STOXX Ltd. maintains and calculates the STOXX Global Index family which consists of total market, broad and blue-chip indices for the regions Americas, Europe, Asia, and Pacific, the sub-regions Latin America and BRIC (Brazil, Russia, India and China), as well as global markets.
The STOXX indices are licensed to over 400 companies around the world as underlyings for Exchange Traded Funds (ETFs), Futures & Options, Structured Products and passively-managed investment funds. Three of the top Exchange Traded Funds (ETFs) in Europe and 30 percent of all assets under management are based on STOXX indices. STOXX Ltd. holds Europe's number one and the world's number three position in the derivatives segment.
In addition, STOXX Ltd. is the marketing agent for the indices of Deutsche Boerse AG and SIX Group AG, amongst them the DAX and the SMI indices.
STOXX Ltd. is part of Deutsche Boerse AG and SIX Group AG.
www.stoxx.com
STOXX does not make any warranties or representations, express or implied with respect to the timeliness, sequence, accuracy, completeness, currentness, merchantability, quality or fitness for any particular purpose of its index data. STOXX is not providing investment advice through the publication of the STOXX® indices or in connection therewith. In particular, the inclusion of a company in an index, its weighting, or the exclusion of a company from an index, does not in any way reflect an opinion of STOXX on the merits of that company. Financial instruments based on the STOXX® indices are in no way sponsored, endorsed, sold or promoted by STOXX.
