Exchange Traded Notes (ETNs) are listed, senior, non-bespoke, unsubordinated, uncollateralised debt securities which represent a contractual obligation made by the ETN issuer to pay the investor a return which is linked to the performance of underlying securities or benchmarks. Benchmarks can be based on interest rates, commodity prices, a basket of shares or bonds or a currency.
Who is this for?
ETNs are used by both professional and private investors looking to diversify and enhance the performance of their portfolios. The product is especially useful in providing individual investors with exposure to assets that are difficult to access as an individual.
- Issued by banks, therefore investors are exposed to the bank’s credit risk. However, the issuing banks have strong balance sheets, meaning that the credit risk remains low.
- More cost-effective to invest in the ETN than in the individual underlying assets.
- Invest in ETNs through a monthly debit order or a small once-off contribution.
- ETNs can be held to maturity or may be bought and sold throughout the trading day.
- Enable tracking of the underlying assets' performance - these assets are always known and made visible to the investor.
- ETNs do not have to hold the actual underlying assets, it instead offers investors synthetic exposure to the performance of the assets.They are subject to the same market risks as the underlying assets they track and will be exposed to the same day-to-day price fluctuations.
- When an investor buys an ETN, the issuer promises to pay the performance of the underlying assets (less expenses).Listed, traded, and settled in Rands.
- Market maker presence to ensure adequate liquidity.
- Are well-regulated by the JSE
How to invest
- Open a brokerage account with a JSE Equity Market member.
- Open an investment plan with an ETN provider and make a lump sum investment or invest by debit order.
- Use a Financial Services Provider’s (FSP) online platform that allows investors to purchase ETF products from different issuers.