UBS has launched the ETRACS Solactive Whitney US Critical Technologies ETN (NYSE Arca: WUTC) as part of the bank’s ETRACS platform of exchange traded notes. The ETN consists of senior unsecured debt securities issued by UBS that mature on March 13, 2053.
According to the prospectus, WUTC provides unleveraged long exposure to the performance of the Solactive Whitney U.S. Critical Technologies CNTR Index, a market-cap weighted index designed to track large- and mid-cap companies in developed markets associated with critical technology sectors that meet a minimum “geopolitical risk rating score.”
The index selection criteria were developed by J.H. Whitney Data Services and are partly based on critical technology areas established by the U.S. Department of Defense. To be included in the index, companies must pass a geopolitical risk rating score using a model that quantifies the relative level of risk that companies may face as a result of geopolitical activities. Such activities can include economic sanctions, national industrial policy actions, national regulatory actions, and other economic strategic competition actions taken by the U.S. and adversarial nations.
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The model assesses publicly available data and assigns scores for each company via 10 weighted factors, including country of incorporation, strategic alliances, and inclusion on the System for Award Management exemption list, which is maintained by the U.S. government to deny government contracts to entities that have engaged in such negative activities as contract nonfulfillment, being agents of a foreign government, or participating in other illicit and/or negligent activities.
A final score is determined based on the weighted average of the score for each of the 10 factors. Companies with lower geopolitical risk are assigned a higher score, and companies must meet a minimum score for inclusion in the Index.
As of March 17, the index was composed of 251 securities. The highest-weighted companies were Microsoft and Amazon, each of which represented a weighting of roughly 5% of the Index.
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