Investors can now choose from a vast pool of exchange traded products, which include both exchange traded funds and exchange traded notes. However, ETNs are not ETFs, and investors should understand the difference.

There are now 202 U.S.-listed ETNs with $21.9 billion in assets under management, according to XTF data. [What is an ETF? — Part 12: Exchange Traded Notes]

ETNs and ETFs both share similar characteristics, and UBS, the underwriting bank of the ETRACS line of ETNs, points out seven key attributes of ETNs in a research note.

An ETN is a bond security. A issuing financial institution promises to pay ETN investors a return on a benchmark index before the ETN matures. Additionally, some ETNs provide current distributions to investors. Since ETNs are a type of debt security, investors will have to watch out for the credit worthiness of the issuing bank.

Niche market exposure. ETNs provide access to hard-to-reach asset classes and sectors, such as master limited partnerships, business development corporations and commodities, among others.

Diversification. The ETN vehicle provides access to asset classes with historically low correlations to traditional investments.

Tax efficient. Investors realize gains or losses upon the sale, maturity or repurchase by the issuer of the ETNs. The ETN structure provides a tax-efficient way to invest in a range of asset classes.