Nyree Stewart is features editor at Investment Adviser
ACRONYMS: WHAT DO THEY MEAN?
With the expansion of the ETP market comes a variety of three-letter acronyms, but what are they?
The general term for exchange-traded products, this can encompass all types including funds, commodities, notes and alternatives.
The traditional exchange-traded fund, it’s generally an authorised fund, listed on a stock exchange that tracks a basket of underlying securities. The exposure to these can either be through physical investments or synthetic replication.
Most commonly this stands for exchange-traded commodities, although in certain cases the ‘C’ can be for currencies. In the case of commodities they tend to track either individual commodities or broader commodity indices, depending on the remit of the vehicle – for example, a pure gold ETC or a precious metals ETC.
According to Morningstar, ETNs are generally senior, unsubordinated debt instruments that are issued by a single bank and listed on a stock exchange. They can be collateralised or uncollateralised and, depending on the structure of the vehicle, the investor can be exposed to counterparty and credit risk from the issuing institution.