Key Takeaways
- • Credit Suisse Long/Short Equity Index ETNs (ticker: CSLS) are senior, unsecured debt securities linked to the Credit Suisse Long/Short Liquid Index, providing exposure to a long/short equity hedge fund strategy through a publicly traded vehicle on NYSE Arca.
- • The ETN carries a 0.45% annual investor fee plus a 0.50% index fee, with actual realized fees potentially exceeding the stated 0.45% annually due to daily compounding effects.
- • Performance metrics as of June 29, 2012 show mixed results: the underlying index delivered 1.29% returns over one month but declined 3.53% over three months and 3.96% over one year, with a positive 3.80% annualized return since inception (October 1, 2010).
- • The product is designed for knowledgeable investors only and explicitly targets institutional and sophisticated retail investors who understand the risks of leveraged long/short equity strategies and the credit risk of the issuing entity.
- • Index construction demonstrates low correlation to traditional equity benchmarks, with correlation to the S&P 500 TR Index measured at near-zero levels as of June 30, 2011 through June 29, 2012.
Summary
Credit Suisse's Long/Short Equity Index ETNs represent a securitized approach to hedge fund-like exposure through an exchange-traded vehicle. Issued by Credit Suisse AG through its Nassau Branch and listed on NYSE Arca under ticker CSLS, these senior unsecured debt notes track the performance of the Credit Suisse Long/Short Liquid Index (Net), which itself mirrors the historical performance characteristics of the Dow Jones Credit Suisse Long/Short Equity Hedge Fund Index. The structure provides retail and institutional investors with direct exposure to a systematic long/short equity strategy without requiring direct hedge fund allocations.
The cost structure reflects both product management and index licensing fees. Investors bear a 0.45% annual investor fee layered on top of a 0.50% index fee, creating a combined cost burden. The disclosure that actual realized fees may exceed 0.45% annually due to daily compounding represents an important distinction for cost-conscious allocators evaluating net-of-fee returns. This fee arrangement positions CSLS within the competitive landscape of alternative investment products but notably higher than passive equity ETF fee schedules.
Performance data as of mid-2012 reveals the cyclical nature of long/short equity strategies. One-month returns showed modest positive performance at 1.29%, but the trailing three-month and one-year periods reflected negative returns of 3.53% and 3.96% respectively. Against this backdrop, the product demonstrated staying power with a 3.80% annualized return since inception in October 2010. The near-zero correlation to the S&P 500 measured across the 12-month period ending June 29, 2012 underscores the diversification characteristics of the long/short approach, a meaningful advantage during equity market volatility.
The product documentation explicitly restricts suitability to knowledgeable investors who comprehend both the operational mechanics of long/short equity strategies and the credit risks inherent in holding unsecured debt obligations of Credit Suisse. This positioning reflects regulatory requirements and issuer risk management protocols.
The cost structure reflects both product management and index licensing fees. Investors bear a 0.45% annual investor fee layered on top of a 0.50% index fee, creating a combined cost burden. The disclosure that actual realized fees may exceed 0.45% annually due to daily compounding represents an important distinction for cost-conscious allocators evaluating net-of-fee returns. This fee arrangement positions CSLS within the competitive landscape of alternative investment products but notably higher than passive equity ETF fee schedules.
Performance data as of mid-2012 reveals the cyclical nature of long/short equity strategies. One-month returns showed modest positive performance at 1.29%, but the trailing three-month and one-year periods reflected negative returns of 3.53% and 3.96% respectively. Against this backdrop, the product demonstrated staying power with a 3.80% annualized return since inception in October 2010. The near-zero correlation to the S&P 500 measured across the 12-month period ending June 29, 2012 underscores the diversification characteristics of the long/short approach, a meaningful advantage during equity market volatility.
The product documentation explicitly restricts suitability to knowledgeable investors who comprehend both the operational mechanics of long/short equity strategies and the credit risks inherent in holding unsecured debt obligations of Credit Suisse. This positioning reflects regulatory requirements and issuer risk management protocols.
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