iShares Files For Multi-Asset ETF, UNG Will Reverse Split 4-For-1

by on February 10, 2012 | ETFs Mentioned:

Equity markets have been quietly drifting higher throughout the week as ongoing Greek debt woes can’t seem to hold back the bulls on Wall Street. Activity on the product development front has been quite robust; VelocityShares added 8 leveraged ETNs to their growing lineup of trading instruments while iShares debuted the cheapest yet small cap India ETF. The industry giant has also filed with the SEC for an intriguing fund-of-funds ETF designed to offer exposure across  multiple asset classes.

The proposed fund from iShares is perhaps best classified as an “all-in-one” product, capable of potentially delivering positive returns in all sorts of economic environments [see SEC Filing]:

  • iShares Morningstar Multi Asset High Income Index Fund: This ETF seeks to replicate the price and yield performance of the Morningstar Multi-Asset High Income Index. The underlying index is broadly diversified and seeks to deliver high current income while maintaining long term capital appreciation; this strategy allocated 20% to equities, 60% in fixed income, and 20% in alternative asset classes (such as REITs and preferred stocks). This product will be structured as an ETF of ETFs, essentially holding other exchange-traded products to achieve its objective [also see Cheapskate Hedge Fund ETFdb Portfolio].

UNG To Reverse Split

Natural gas prices have sunk to all-time lows amidst an uncharacteristically warm winter season coupled with much larger-than-expected stockpiles. To address this freefall, U.S. Commodity Funds will be implementing a 4-for-1 reverse split on its well-known United Sates Natural Gas Fund (UNG); this ETF is down nearly 20% year-to-date and has lost nearly 95% of its value since inception [see UNG Returns].

The reverse split will essentially ensure that this product stays above the $5 a share threshold, which is an important consideration for most listed securities. Although the declines in prices have been rather astronomical, this is not the first revere split in UNG’s history; this ETP reverse split 2-for-1 about a year ago, although it clearly hasn’t done enough to soften the blow. The reverse split will be effective on February 22 of this year, for shareholders of record as of February 21st [see also Why It's Time To Buy Natural Gas]. Based on today’s price, UNG should be trading somewhere in the neighborhood of $21 a share.

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Disclosure: No positions at time of writing.