On July 30, 2018, Barclays Index Administration (“BINDA”) announced the opening of a formal stakeholder consultation on proposed material changes to the methodologies of the Shiller Barclays CAPE® Sector Index Family (the “Index Family”). The Barclays ETN+ Shiller CAPE® ETNs (the "ETNs") are linked to the performance of the Shiller Barclays CAPE® US Core Sector Index (the "Index") (Bloomberg Ticker: BXIICCST), which is an index in the Index Family.
The consultation process gathered feedback on proposals for dealing with the Global Industry Classification Standard (“GICS”) Sector changes, instituted by MSCI Inc. and Standard & Poor’s (S&P), to broaden and rename the Telecommunication Services Sector as the Communication Services Sector. BINDA conducted a thorough review of the proposed changes, supporting rationale and stakeholder feedback. BINDA confirmed the decision following the end of the consultation on August 31, 2018. The changes outlined below were implemented by BINDA on September 28, 2018.
The changes to the Index are summarized below.
- Sector Universe: reflect the split of the Technology Sector into Information Technology and Communication Services and thereby add an additional sector to the sector universe analyzed by the Index as potentially eligible to be included in the Index;
- Rebalancing: use the existing standard schedules of monthly Rebalancing Dates; and
- Update data: use updated price and earnings data for all future index selections.
The official index announcement from BINDA relating to the changes can also be found on BINDA’s website at: https://indices.barclays/
In relation to the use of updated price and earnings data, BINDA decided that this data should be used for all sectors, and not just the three sectors most impacted by the GICS changes. Additionally, BINDA noted that the rebalancing for the S&P Select Sector indices corresponding to the sectors eligible for inclusion in the Index occurred prior to the market open on Monday, September 24, 2018, in conjunction with the S&P index rebalancing.
The ETNs were listed on the NYSE Arca stock exchange in October 2012 under the ticker symbol CAPE. An investment in the ETNs involves significant risks, including possible loss of principal, and may not be suitable for all investors. The ETNs are riskier than ordinary unsecured debt securities and have no principal protection. The ETNs are speculative and may exhibit high volatility. The ETNs are also subject to certain investor fees, which will have a negative effect on the value of the ETNs.
The Index aims to provide a notional long exposure to the top four relatively undervalued US equity sectors that also exhibit relatively strong price momentum. The Index incorporates the CAPE (Cyclically Adjusted Price Earnings) ratio to assess equity market valuations of nine sectors on a monthly basis and to identify the relatively undervalued sectors represented in the S&P 500®. The Index then selects the top four undervalued sectors that possess relatively stronger price momentum over the past twelve months and allocates an equally weighted notional long position in the total return version of the S&P Sector Indices (each, a Sector Index) corresponding to the selected sectors. Owning the ETNs is not the same as owning interest in the Index Constituents or a security directly linked to the performance of the Index. For more information on the risks associated with the ETNs, please see "Selected Risk Considerations" below and the risk factors included in the relevant prospectus.
For further information, please contact the Barclays ETN desk at 1-212-528-7990.
The prospectus for the ETNs to which this communication relates can be found at: http://www.etnplus.com/CAPEprospectus
Barclays is a transatlantic consumer and wholesale bank offering products and services across personal, corporate and investment banking, credit cards and wealth management, with a strong presence in our two home markets of the UK and the US.
With over 325 years of history and expertise in banking, Barclays operates in over 40 countries and employs approximately 80,000 people. Barclays moves, lends, invests and protects money for customers and clients worldwide.
For further information about Barclays, please visit our website home.barclays
Selected Risk Considerations
An investment in any ETNs linked to the Index (the “ETNs”) involves risks. Selected risks are summarized here, but we urge you to read the more detailed explanation of risks described under “Risk Factors” in the applicable prospectus supplement and pricing supplement.
You May Lose Some or All of Your Principal: The ETNs are exposed to any decrease in the level of the underlying index between the inception date and the applicable valuation date. Additionally, if the level of the underlying index is insufficient to offset the negative effect of the investor fee and other applicable costs, you will lose some or all of your investment at maturity or upon redemption, even if the value of such index has increased. Because the ETNs are subject to an investor fee and any other applicable costs, the return on the ETNs will always be lower than the total return on a direct investment in the index components. The ETNs are riskier than ordinary unsecured debt securities and have no principal protection.
Credit of Barclays Bank PLC: The ETNs are unsecured debt obligations of the issuer, Barclays Bank PLC, and are not, either directly or indirectly, an obligation of or guaranteed by any third party. Any payment to be made on the ETNs, including any payment at maturity or upon redemption, depends on the ability of Barclays Bank PLC to satisfy its obligations as they come due. As a result, the actual and perceived creditworthiness of Barclays Bank PLC will affect the market value, if any, of the ETNs prior to maturity or redemption. In addition, in the event Barclays Bank PLC were to default on its obligations, you may not receive any amounts owed to you under the terms of the ETNs.
Issuer Redemption: Barclays Bank PLC will have the right to redeem or “call” the ETNs (in whole but not in part) at its sole discretion and without your consent on any trading day on or after the inception date until and including maturity.
Dynamic Allocation and Strategy Risk: The value of the index will depend upon the success of the index in dynamically allocating among the Sector Indices. The allocation among the Sector Indices is based upon a proprietary index methodology sponsored by Barclays Bank PLC that may not provide outperformance relative to any alternative allocation among the Sector Indices or a diversified portfolio generally, and is made in accordance with pre-defined weightings that may not be optimal.
Market and Volatility Risk: The market value of the ETNs may be influenced by many unpredictable factors and may fluctuate between the date you purchase them and the maturity date or redemption date. You may also sustain a significant loss if you sell your ETNs in the secondary market. Factors that may influence the market value of the ETNs include prevailing market prices of the U.S. stock markets, the index components included in the underlying index, and prevailing market prices of options on such index or any other financial instruments related to such index; and supply and demand for the ETNs, including economic, financial, political, regulatory, geographical or judicial events that affect the level of such index or other financial instruments related to such index.
A Trading Market for the ETNs May Not Develop: Although the ETNs are listed on NYSE Arca, a trading market for the ETNs may not develop and the liquidity of the ETNs may be limited, as we are not required to maintain any listing of the ETNs.
Restrictions on the Minimum Number of ETNs and Date Restrictions for Redemptions: You must redeem at least 25,000 ETNs at one time in order to exercise your right to redeem your ETNs on any redemption date. You may only redeem your ETNs on a redemption date if we receive a notice of redemption from you by certain dates and times as set forth in the pricing supplement.
Tax Treatment: Significant aspects of the tax treatment of the ETNs may be less favorable than a direct investment in MLPs and are uncertain. You should consult your own tax advisor about your own tax situation.
The ETNs may be sold throughout the day on the exchange through any brokerage account. Commissions may apply and there are tax consequences in the event of sale, redemption or maturity of ETNs.
“Shiller Barclays CAPE® US Core Sector Index" is a trademark of Barclays Bank PLC.
“CAPE®” is a registered trademark of RSBB-I, LLC ("RSBB") and has been licensed for certain purposes by Barclays Bank PLC.
The S&P 500® Index is a product of Dow Jones Indices LLC (“SPDJI”), and has been licensed for use by Barclays Bank PLC. S&P® and S&P 500® are registered trademarks of Standard & Poor’s Financial Services, LLC (“SPFS”). These trademarks have been licensed to SPDJI and its affiliates and sublicensed to Barclays Bank PLC for certain purposes. The Shiller Barclays CAPE® US Core Sector Index (the "Index") which is based on the S&P 500® and the Sector Indices is not sponsored or endorsed by S&P Dow Jones Indices LLC, Dow Jones, S&P, or any of their respective subsidiaries or affiliates (collectively, “S&P Dow Jones Indices”), but is published with their consent. The ETNs based on the Index are not sponsored or endorsed by S&P Dow Jones Indices or any of their respective affiliates and S&P Dow Jones Indices makes no representation or warranty, express or implied, to the owners of the ETNs or any member of the public regarding the advisability of investing in securities generally or in the ETNs particularly or the ability of the Index to track general market performance.
The Shiller Barclays CAPE US Index Family has been developed in part by RSBB, LLC, the research principal of which is Robert J. Shiller. RSBB, LLC is not an investment advisor and does not guarantee the accuracy and completeness of the Shiller Barclays CAPE US Index Family or any data or methodology either included therein or upon which it is based. RSBB, LLC shall have no liability for any errors, omissions or interruptions therein and makes no warranties expressed or implied, as to the performance or results experienced by any party from the use of any information included therein or upon which it is based, and expressly disclaims all warranties of the merchantability or fitness for a particular purpose with respect thereto, and shall not be liable for any claims or losses of any nature in connection with the use of such information, including but not limited to, lost profits or punitive or consequential damages even, if RSBB, LLC is advised of the possibility of same.
©2018 Barclays Bank PLC. All rights reserved. All other trademarks, servicemarks or registered trademarks are the property, and used with the permission, of their respective owners.
NOT FDIC INSURED | NO BANK GUARANTEE | MAY LOSE VALUE
Brittany Berliner, +1 212-526-4894