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Credit Suisse says 'complete loss' likely for buyers of oil exchange-traded notes

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Credit Suisse has a message for investors in its triple-leveraged oil exchange-traded notes (ETNs): Buy at your own risk.

[NEW YORK] Credit Suisse has a message for investors in its triple-leveraged oil exchange-traded notes (ETNs): Buy at your own risk.

The intraday indicative value of the VelocityShares Daily 3x Inverse Crude exchange-traded notes, or DWTIF, was equal to or less than US$0 on Thursday, according to a Credit Suisse statement.

As a result, the closing indicative value will be US$0, which means current holders and future buyers won't receive a payout at maturity, if the ETN is called or if they attempt to redeem, it said.

"Because the closing indicative value of the ETNs will be US$0 on April 2, 2020 and on all future days, investors who buy the ETNs at any time at any price above US$0 will likely suffer a complete loss of their investment," Credit Suisse said.

That's one of the final chapters in a once-popular product that amassed more than US$1 billion in assets at its peak over four years ago. In November 2016, Credit Suisse announced that it would delist and suspend issuance of the notes.

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While Thursday's announcement from Credit Suisse means DWTIF is essentially "worthless", it's highly unusual for holders not to receive any kind of payout, according to Morningstar.

"I can say with confidence that this is a bad investment," said Ben Johnson, Morningstar's co-head of passive strategy research.

DWTIF, a bearish leveraged ETN, has surged in 2020 amid oil's swoon. Though crude jumped Friday as Opec+ scheduled an urgent meeting next week to try and stem the market's rout, oil is still down more than 50 per cent in 2020.

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