Titles Referenced to Shares (TRAC's), are participation certificates representing equity investment trusts. These instruments hold portfolios of shares of listed companies and a cash component. Their primary objective is to replicate the behavior of the stocks or portfolio which they’re referred to (underlying).
These certificates are traded on stock exchanges and allow investors to buy or sell an index or portfolio of shares through a single stock, providing to the investing public, liquidity and investment options.
The "Exchange Traded Funds" ("ETFs" also known by the name of "Trackers") are relatively new financial instruments with an increasing volume of investments around the world. The main attribute of ETFs is that they combine some benefits of direct investment in equity securities listed on stock exchanges and which may be acquired intraday, with benefits similar with those of an indexed mutual fund, often with minor costs than those involved when investing on mutual funds. Currently there are approximately 500 Trackers in the world.
During the first quarter of 2002 the BMV implemented in Mexico the first IPO and operation of this type of instrument by listing Naftrac ISHRS, the first Title Referenced to Stocks (TRAC), which is a very similar instrument to those ETF’s traded on other markets. These instruments use as vehicle a trust investment that emits Certificates of Participation according to the amount and securities held under management, which are freely traded on the stock market.
Main benefits of TRAC's
Entre los beneficios que presentan se encuentran:
- Transparency and liquidity.
- Provide a wider range of investment opportunities, including access to other markets via the local exchange.
- Allow diversification of investments (industry, sector or country) in an efficient and transparent manner.
- Allow passive investment (investment indexed).
- Combine the advantages of indexing investment with an underlying equity of the operation.
- Allow the replication of an index without having to buy all assets.
- Help to the control of personal investments or portfolios.
- Lower operating costs:
- Low management and operating fees.
- No commissions on the buy and sale of securities are paid due to the portfolio does not change over time.
Transparency and liquidity
- You can buy or sell at any time during trading hours set by Stock Exchange.
- The assets in the trust do not change, except for corporate events.
- The TRAC’s stakeholders hold the economic rights in the stocks.