From the June 2008 issue of Research Magazine • Subscribe!

Troubled UBS Grows in ETNs

Despite massive multi-billion dollar write-downs and a growing chorus of angry activist shareholders, UBS has introduced eight new commodity linked exchange-traded notes.

The UBS E-TRACS ETNs are linked to the performance of both the broader UBS Bloomberg Constant Maturity Commodity Index (CMCI) and its more narrowly focused sub-indexes. These ETNs trade under the following ticker symbols:o UCI: E-TRACS linked to the UBS Bloomberg CMCI Indexo UBM: E-TRACS linked to the UBS Bloomberg CMCI Industrial Metals Indexo UBN: E-TRACS linked to the UBS Bloomberg CMCI Energy Indexo UAG: E-TRACS linked to the UBS Bloomberg CMCI Agriculture Indexo UBC: E-TRACS linked to the UBS Bloomberg CMCI Livestock Indexo FUD: E-TRACS linked to the UBS Bloomberg CMCI Food Indexo UBZ: E-TRACS linked to the UBS Bloomberg CMCI Gold Indexo USV: E-TRACS linked to the UBS Bloomberg CMCI Silver Index

ETNs are debt securities backed by the credit of the issuer. As major financial institutions have become engulfed in the firestorm of mounting credit losses, investors are becoming more sensitive to taking on credit-issuer risk. The price and value of ETNs is acutely affected by the credit rating of the issuing bank or investment firm.

The timing of the UBS launch seems particularly curious. Just as the ETNs were listed for trading, the Swiss investment bank announced $37.4 billion in write-downs on bad investments over the past nine months.

Along with the UBS notes, two other ETNs debuted. The ELEMENTS Credit Suisse Global Warming Index ETN (GWO) follows stocks of companies that focus on products or services related to minimizing global warming. For commodity-minded investors, the ELEMENTS MLCX Precious Metals Index ETN (PMY) tracks key segments of the precious metals sector, including gold, silver, platinum and palladium. Credit Suisse is the issuer for these two ELEMENTS ETNs and they're distributed by Nuveen Investments and Merrill Lynch.

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