ETF Securities has listed 16 currency ETCs on the London Stock Exchange, tracking the triple long and triple short versions of the MSFXSM Indices published by Morgan Stanley & Co Inc. The launch of the triple leveraged currency ETCs is a first of its kind in Europe.
Structurally, the triple leveraged currency ETCs have unique features which are otherwise not available to investors wanting to access foreign exchange - they are at least 100% collateralised and the maximum possible loss is the value of the initial investment.
The MSFXSM Indices rebalance daily, meaning that returns over periods longer than one day are path dependent. The triple leveraged currency ETCs therefore have the scope to deliver compound returns in trending markets and will likely underperform in volatile, directionless markets. It is important that investors understand this feature of the returns, the details of which are further set out in the UK Listing Authority-approved prospectus for these products.
Commenting on the launch of the new products, Neil Jamieson, Director of Third Party Distribution at ETF Securities, said:
"This is an exciting opportunity for investors. The triple long and triple short currency ETCs can be used by investors both to hedge and to capture market trends. On the latter point, foreign exchange markets are often driven by momentum. Given the historically low levels of volatility on currency pairs, the triple currency ETCs can prove to be a powerful vehicle to capture market trends.
The near 850% appreciation, despite the sharp reversal in 2008, of the triple long Australian Dollar short US Dollar version of the MSFXSM Index (Triple Long Australian Dollar Index [TR]) in the period from January 2002 to October 2010 (based on simulated data) illustrates how a trending market can deliver exceptional returns."
ETF Securities' triple long and triple short currency ETCs listed on the LSE are as follows:
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