Deustche Bank AG (DB) said it will resume selling 240 million new shares of the PowerShares DB US Dollar Index Bullish Fund (UUP) on Tuesday.
In a move that highlights the sometimes unpredictable nature of exotic exchange-traded funds, the bank last month said it would temporarily halt issuing new shares of the ETF designed to help investors bet on the dollar, the second time it had done so since November.
The move reflected “exceptional investor demand” for the $3 billion fund, which grew from about $300 million during the past year.
Typically, ETFs accommodate investor demand by essentially creating new fund shares whenever investors want to buy them. But commodity funds, with a unique legal structure, don’t have the same flexibility in this regard as stock ETFs. Fund managers need to anticipate the number of shares they keep on hand, and if investor demand suddenly spikes, they can be caught short.
When the dollar ETF ran short of new shares in November, Deutsche Bank said it filed for 100 million more. Those lasted little more than a month, so this time managers will sell 240 million.
PowerShares DB US Dollar Index Bullish Fund’s shares closed Monday at $22.92, down 0.7%, and added 1 cent after hours. The shares have lost 8% in the past year.
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