ETNs: Another Diversification Tool for Your Portfolio

Exchange traded funds’ (ETFs) cousins, exchange traded notes (ETNs)experienced a successful debut, although their appeal is a mystery to some. The Barclays iPath ETNs have gathered more than $2.6 billion after a little under a year. The ETNs are similar to an ETF in that they track an underlying index. David Hoffman of InvestmentNews says that ETNs are actually debt securities backed by the credit of the issuer. ETFs are collateralized by an underlying portfolio of securities. So what is the appeal of an ETN?

ETNs offer exposure to certain markets that were difficult for individul investors to access. Barclays ETNs offer exposure to commodities, emerging markets and currencies via iPath notes. Basically, they are another diversification tool.