Exchange Traded Notes (ETNs) are exchange-traded debt instruments that give investors access to a wide spectrum of assets. The investor lends money to the issuer of the ETN, usually a bank, and then receives a return based on the movements in a specific benchmark. Benchmarks can be based on interest rates, commodity prices, a basket of Shares or Bonds or a currency.
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 granting individual investors exposure to assets that are difficult to access as an individual investor. As they involve a higher degree of risk than ETFs, they suit investors will a higher risk tolerance.