What is an exchange traded note (ETN)?

An exchange traded note (ETN) is a debt security issued by a bank and traded on a stock exchange. Their value will be based on the performance of a specific index and the payout due to the investor on maturity will reflect this.

Where have you heard about exchange traded notes (ETN)?

As an investor, you may have been advised to diversify your portfolio by investing in an ETN. Your financial adviser may have suggested that a particular ETN would make a sound investment. Financial media may have featured ETNs as a specialist investment.

What you need to know about exchange traded notes (ETN).

ENTs are similar to exchange-traded funds (ETFs) as they both fall under the catch-all term of exchange-traded products (ETPs) and are traded on a major exchange, such as the LSE during usual trading hours.

An investor runs two separate risks with ETN investment. The first is that the underlying index will perform sufficiently poorly that not only is there no gain for investors but the repayment of principal may give them less money than was paid for the ETN in the first place. The second is that the issuing bank may encounter solvency problems and default on the ETN.

Find out more about exchange traded notes (ETN).

An ETN is a type of exchange traded product. Find out more about exchange-traded products (ETPs) with our definition.