The exchange traded fund (ETF) frenzy is hitting investors and providers of all types, and the latest are investment banks. They take the path of the exchange traded note (ETN) and several titans such as Deutsche Bank and J.P. Morgan Chase have plans in the making, reports Shefali Anand for The Wall Street Journal. An ETN is like an ETF in that it tracks an index and trades on the stock market throughout the day. ETNs, however, are a debt instrument where the investor assumes the risk of default through the provider. ETNs are becoming a way to "re-package and sell" investment products previously offered only to institutional investors and wealthy clients.
Joe Morris for Ignites reports that one edge an ETN has is that they provide access to hard to reach areas such as currencies and commodities. ETNs are not overseen by the Investment Company Act, so there is no board of directors overseeing the products. Whether or not ETNs will be viewed as "prepaid forward contracts," qualifying for lower capital gains taxes is yet to be announced.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.