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Finally, Inverse JGB Etps!

 November 16, 2011 02:10 PM

OK, so I am trying to be funny with that title. PowerShares at some point listed the Japanese Government Bond Futures ETN (JGBL) and the 3x Japanese Government Bond Futures ETN (JGBT) which both offer long exposure to the JGB market albeit in an ETN. Now PowerShares has come along with inverse versions of those same funds; the PowerShares DB Inverse Japanese Government Bond Futures ETN (JGBS) and the PowerShares DB 3x Inverse Japanese Government Bond Futures ETN (JGBD).

The already existing long versions of these funds have little to no volume so why would they come out with inverse versions that would seem to have little promise of garnering much volume?

Candidly, I don't know but I do have a theory. For a couple of funds that do not trade much, the two older long funds have a lot of assets; about $80 million each per Google Finance. Providers don't seed funds with that much money, not even close. Someone, for some reason has positions in these funds (IMO). If that is correct then it is possible, very plausible, that PowerShares knows who has these positions and whoever it is now wants exposure on the other side of the market.

Over the years I have heard of instances where a big pool of money has a direct line into a fund provider like this and when the manager asks for a particular product it happens. I think this can be a positive in that if ETFs are the democratizing force I think they are then providers creating products based on end-user demand is a positive for the people making the request but also for the fund companies because if there is demand for fund then that demand will lead to AUM.

I've disclosed a few times that I've been lead to believe that this blog has had influence on a handful of funds that have come out over the years. While I don't know if that is true, I have been asked for input on numerous occasions and so it is logical that other advisors/bloggers/both are also asked for similar input.

This blog has tried to chronicle the evolution in the space since inception in 2004 (how nutty is it that the blog is seven years old?) and will continue to do. You, as an audience of end users can have input here, and at other blogs too, to help the industry evolve. This is very democratizing only if you take advantage of it.


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