Exchange traded notes (ETNs) have seen some chinks in their armor this year, in the wake of the credit crisis and a commodities slowdown.

ETNs, which are close cousins of exchange traded funds (ETFs), have been bleeding investor assets after being hit with a double-whammy of credit jitters and declining commodity prices, says Ian Salisbury for The Wall Street Journal.

In September, investors extracted about $460 million from the 90 ETNs tracked by fund researcher Morningstar, a chunk of their $5.5 billion in overall assets. Although October numbers aren’t calculated yet, the general feeling is that they could be worse.

The largest ETN is the iPath Dow Jones AIG Commodity Index Total Return (DJP), which reported that about 12% of outstanding shares were redeemed during the month through Thursday.

While money has indeed been coming out of ETNs, commodity prices have declined across the board. I spoke at the Inside Commodities Conference in New York this week, where there was a great exchange of ideas and opinions. One of the questions at the conference was whether exchange traded products fueled commodity prices in 2007 and 2008, and the general consensus seemed to be yes. As those markets have corrected, there have been redemptions in commodity funds. Regardless of supply and demand issues, these ETNs did what they were supposed to do.

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