Exchange Traded Notes (ETNs) are senior, unsecured, unsubordinated debt securities. Unlike most bonds, at maturity there is no repayment of capital and no interest distribution over the life of the bond. The return is the direct performance of a specific index. ETNs are designed to track the total return of an underlying index or benchmark, minus investor fees.
ETNs are designed to provide exposure to a specific asset class or index in a similar way to ETFs and ETCs.
ETNs are different from these products in three key areas:
- ETNs have a single counterparty risk. The repayment of principal, interest (if any) and the payment of any returns at maturity or upon redemption are dependent on the issuer’s ability to pay.
- ETNs can be bought and sold on the exchange like a stock. However, ETNs can also be sold back at the relevant redemption value by the investor on a daily basis, subject to minimum redemption amounts.
- ETNs pay returns directly linked to the performance of the underlying index.
Often ETNs are used to offer exposure to assets that can not be achieved with a fund, for example single commodities. ETN is a debt obligation of the issuer that is linked to a derivative. ETN looks similar to a Swap based ETF, except there is no basket of securities and the legal structure is Debt vs Fund.
Do not hesitate to have a look at our Exchange Traded Notes (ETNs) database.
If you want to contribute to give greater details to this article please contact us.