What is an equity-linked note?
Equity-linked notes (ELN) are debt instruments that allow a borrower to raise funds by promising to repay a lender in a timeframe agreed by contract.
Where have you heard about equity-linked notes?
You’ve probably heard equity-linked notes mentioned with other debt instruments like bonds, debentures, certificates, mortgages and leases.
What you need to know about equity-linked notes.
They’re different to standard fixed-income securities which provide regular repayments at a rate agreed in advance. These are designed to be kept to maturity with the final payout determined by the performance of the underlying equity, which is the return of a single stock, basket of stocks, or an equity index.
Equity-linked notes are a lower risk investment as they tend to be principal-protected which means an investor you’re guaranteed to receive 100% of the amount you invested at maturity. However, due to their conservative nature there is the risk that you might not receive any additional returns.
Find out more about equity-linked notes.
Find out more about how underlying equity works and compare equity-linked notes to fixed-income securities.