The new iPath Optimized Currency Carry Exchange Traded Note (ETN) has begun trading on the NYSE-Arca Stock Exchange under the ticker symbol ICI.
This is the first iPath ETN to provide investors with a cost effective way to capitalize on inefficiencies in the currency market and gain diversified currency exposure to help reduce portfolio risk.
“The iPath Optimized Currency Carry ETN offers investors the opportunity to invest in a diversified basket of currencies in a transparent and cost efficient way with the ease of trading on an exchange,” says Philippe El-Asmar, managing director, head of Solution Sales, Americas, Barclays Capital.
This new iPath ETN is linked to the performance of the Barclays Intelligent Carry Index, which is designed to reflect the total return of an “Intelligent Carry Strategy” which seeks to capture the potential return from a strategy of investing in high yielding currencies with the exposure financed by borrowings in low-yielding currencies.
The pool of currencies to which the index may apply these strategies is commonly referred to as the “G10 currencies” and includes the US dollar, the euro, the Japanese yen, the Canadian dollar, the Swiss franc, the British pound sterling, the Australian dollar, the New Zealand dollar, the Norwegian krone and the Swedish krona.
The index is composed of ten cash-settled currency forward agreements, one for each index constituent currency, as well as a “Hedged USD Overnight Index” which is intended to reflect the performance of a risk-free US dollar-denominated asset.
Institutional investors have used the “carry trade” strategy to buy currencies in regions with high interest rates, while shorting currencies in countries having low interest rates in the hope of capturing returns. In addition to capitalizing on the carry trade strategy, exposure to currencies can provide investors with a historically non-correlated asset to add to a portfolio, something that has grown increasingly valuable as global markets and economies have grown increasingly interdependent.
The iPath Optimized Currency Carry ETN is a senior, unsecured, unsubordinated debt security linked to the performance of the Barclays Intelligent Carry IndexTM and issued by Barclays Bank PLC. iPath ETNs are designed to provide investors with convenient access to the returns of market benchmarks, less investor fees.
Subject to the requirements described in the applicable prospectus, the securities can be sold in the secondary market during trading hours at market prices, and may be redeemed in at least 50,000 units on a daily basis directly to the Issuer