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.

Who is this for?

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.

Features

  • Issued by banks, therefore investors are exposed to the bank’s credit risk. However, the issuing banks have strong balance sheets, meaning that the credit risk remains low.
  • More cost-effective to invest in the ETN than in the individual underlying assets.
  • Invest in ETNs through a monthly debit order or a small once-off contribution.
  • ETNs can be held to maturity or may be bought and sold throughout the trading day.
  • Enable tracking of the underlying assets' performance - these assets are always known and made visible to the investor.
  • ETNs do not have to hold the actual underlying assets, it instead offers investors synthetic exposure to the performance of the assets.
  • They are subject to the same market risks as the underlying assets they track and will be exposed to the same day-to-day price fluctuations.
  • When an investor buys an ETN, the issuer promises to pay the performance of the underlying assets (less expenses).
  • Listed, traded, and settled in Rands.
  • Market maker presence to ensure adequate liquidity.
  • Are well-regulated by the JSE.

How to invest

  • Open a brokerage account with a JSE Equity Market member.
  • Open an investment plan with an ETN provider and make a lump sum investment or invest by debit order.
  • Use a platform that allows you to buy ETN products from different issuers.

ETN List
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ExchangeTradedNotes(ETNs)
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