Are all of your ETF holdings truly exchange-traded funds? Or, are some of them exchange-traded notes, otherwise known as ETNs? Chances are, you might not even know. However, this knowledge is crucial if you want to get a handle on the risks associated with your holdings.
ETNs are unsecured debt securities – bonds. Even if your ETN is tracking a stock index or a commodity index, you are still holding a bond, an unsecured note. If the issuer defaults or declares bankruptcy, you have no recourse except to stand in line with all the other unsecured creditors and hope that some day you might see a partial return of your investment.
Think this is unlikely? Think again. On September 12, 2008, Lehman Brothers declared bankruptcy. ETN owners may not have known it at the time, but Lehman was the issuer of three ETNs (see table of ETN closures below).
This is very different from investing in ETFs. ETFs are set up as independent legal entities. The money received by the fund is used to buy securities, and the assets of the fund are kept separate from the issuer and sponsor of the fund. If the issuer of an ETF goes under, then the fund just hires a new manager. That structure does not exist with ETNs.
So, how can you tell if what you own is an ETF or an ETN? The best way of course, is to read the prospectus. However, I know of far too many investors who have never done that. Instead, they tend to look at fund summaries and fact sheets. Others might put their expensive subscription to Morningstar to work. But guess what, Morningstar does not make a distinction between ETFs and ETNs. However, Morningstar does append the letters “ETN” to the names of about two-thirds of them.
At the end of 2008, the number of U.S. listed exchange-traded products totaled 845, consisting of 760 ETFs and 85 ETNs. The comprehensive list of ETNs appears below. The name of the issuer is often unrelated to the name of the ETN, and in many cases may surprise you. However, these are the names you need to know, because that is where the risk of default lies.
There are credit ratings available for the ETN issuers. However, none of those ratings are repeated here due to concerns of accuracy and timeliness. This is a fast-moving market, and the fate of an issuer can change quickly. Furthermore, none of the issuers will announce any concerns of ongoing viability for fear of a run on their assets that will surely put them under.
U.S. LISTED ETNS AS OF JAN. 27, 2009
| Ticker | Name | Note Issuer |
|---|---|---|
| ADZ | PowerShares DB Agriculture Short ETN | Deutsche Bank AG, London Branch |
| AGA | PowerShares DB Agriculture Double Short ETN | Deutsche Bank AG, London Branch |
| AGF | PowerShares DB Agriculture Long ETN | Deutsche Bank AG, London Branch |
| AYT | Barclays GEMS Asia 8 ETN | Barclays Bank, PLC. |
| BAL | iPath DJ-AIG Cotton ETN | Barclays Bank, PLC. |
| BDD | PowerShares DB Base Metals Dbl Lg ETN | Deutsche Bank AG, London Branch |
| BDG | PowerShares DB Base Metals Lng ETN | Deutsche Bank AG, London Branch |
| BOM | PowerShares DB Base Metals Dbl Sh ETN | Deutsche Bank AG, London Branch |
| BOS | PowerShares DB Base Metals Sht ETN | Deutsche Bank AG, London Branch |
| BSC | Elements Ben Graham Small Cap Value ETN | Deutsche Bank AG |
| BSR | BearLinx Alerian MLP Select ETN | (see notes) |
| BVL | Elements Ben Graham Large Cap Value ETN | Deutsche Bank AG |
| BVT | Elements Ben Graham Total Mkt Value ETN | Deutsche Bank AG |
| BWV | iPath CBOE S&P; 500 BuyWrite Index ETN | Barclays Bank, PLC. |
| CNY | Market Vectors Chinese Renminbi/USD ETN | Morgan Stanley |
| COW | iPath DJ AIG Livestock Total Return ETN | Barclays Bank, PLC. |
| DAG | PowerShares DB Agriculture Double Long ETN | Deutsche Bank AG, London Branch |
| DDP | PowerShares DB Commodity Short ETN | Deutsche Bank AG, London Branch |
| DEE | PowerShares DB Commodity Double Short ETN | Deutsche Bank AG, London Branch |
| DGP | PowerShares DB Gold Double Long ETN | Deutsche Bank AG, London Branch |
| DGZ | PowerShares DB Gold Short ETN | Deutsche Bank AG, London Branch |
| DJP | iPath DJ AIG Commodity Total Return ETN | Barclays Bank, PLC. |
| DOD | Elements Dogs of the Dow Total Return ETN | Deutsche Bank AG |
| DPU | PowerShares DB Commodity Long ETN | Deutsche Bank AG, London Branch |
| DRR | Market Vectors Double Short Euro ETN | Morgan Stanley |
| DTO | PowerShares DB Crude Oil Dbl Shrt ETN | Deutsche Bank AG, London Branch |
| DXO | PowerShares DB Crude Oil Dbl Long ETN | Deutsche Bank AG, London Branch |
| DYY | PowerShares DB Commodity Double Long ETN | Deutsche Bank AG, London Branch |
| DZZ | PowerShares DB Gold Double Short ETN | Deutsche Bank AG, London Branch |
| EEH | Elements Spec LgCap US Sector Mo ETN | Swedish Export Credit Corp. |
| ERO | iPath EUR/USD Exchange Rate ETN | Barclays Bank, PLC. |
| FUD | E-TRACS CMCI Food Total Return ETN | UBS AG |
| FUE | Elements MLCX Biofuels ETN | Swedish Export Credit Corp. |
| GAZ | iPath DJ AIG Natural Gas Total Return ETN | Barclays Bank, PLC. |
| GBB | iPath GBP/USD Exchange Rate ETN | Barclays Bank, PLC. |
| GCE | Claymore CEF Index GS Connect ETN | The Goldman Sachs Group, Inc. |
| GOE | Elements MLCX Gold ETN | Credit Suisse |
| GRN | iPath Global Carbon ETN | Barclays Bank, PLC. |
| GRU | Elements MLCX Grains Total Return ETN | Swedish Export Credit Corp. |
| GSC | GS Connect S&P; GSCI Enh Commodity ETN | The Goldman Sachs Group, Inc. |
| GSP | iPath S&P; GSCI Total Return Index ETN | Barclays Bank, PLC. |
| GWO | Elements CS Global Warming ETN | Credit Suisse |
| ICI | iPath Optimized Currency Carry ETN | Barclays Bank, PLC. |
| INP | iPath MSCI India Index ETN | Barclays Bank, PLC. |
| INR | Market Vectors Indian Rupee/USD ETN | Morgan Stanley |
| JEM | Barclays GEMS Currency Index ETN | Barclays Bank, PLC. |
| JFT | First Trust Enhanced 130/30 Large Cap ETN | JPMorgan Chase & Co. |
| JJA | iPath DJ AIG Agriculture ETN | Barclays Bank, PLC. |
| JJC | iPath DJ AIG Copper ETN | Barclays Bank, PLC. |
| JJE | iPath DJ AIG Energy ETN | Barclays Bank, PLC. |
| JJG | iPath DJ AIG Grains ETN | Barclays Bank, PLC. |
| JJM | iPath DJ AIG Industrial Metals ETN | Barclays Bank, PLC. |
| JJN | iPath DJ AIG Nickel ETN | Barclays Bank, PLC. |
| JJP | iPath DJ AIG Precious Metals ETN | Barclays Bank, PLC. |
| JJS | iPath DJ AIG Softs ETN | Barclays Bank, PLC. |
| JJT | iPath DJ AIG Tin ETN | Barclays Bank, PLC. |
| JJU | iPath DJ AIG Aluminum ETN | Barclays Bank, PLC. |
| JO | iPath DJ AIG Coffee ETN | Barclays Bank, PLC. |
| JYN | iPath JPY/USD Exchange Rate ETN | Barclays Bank, PLC. |
| LD | iPath DJ AIG Lead ETN | Barclays Bank, PLC. |
| LSC | Elements S&P; Commodity Trends Idr ETN | HSBC USA Inc. |
| LSO | Elements MLCX Livestock ETN | Credit Suisse |
| NIB | iPath DJ AIG Cocoa ETN | Barclays Bank, PLC. |
| OIL | iPath S&P; GSCI Crude Oil Total Return ETN | Barclays Bank, PLC. |
| OLO | PowerShares DB Crude Oil Long ETN | Deutsche Bank AG, London Branch |
| PGD | Barclays Asian&Gulf; Currency Reval. ETN | Barclays Bank, PLC. |
| PGM | iPath DJ Platinum ETN | Barclays Bank, PLC. |
| PMY | Elements MLCX Precious Metals ETN | Credit Suisse |
| PTD | E-TRACS CMCI Short Platinum Exc Ret ETN | UBS AG |
| PTM | E-TRACS CMCI Long Platinum TR ETN | UBS AG |
| RJA | Elements Rogers Agriculture ETN | Swedish Export Credit Corp. |
| RJI | Elements Rogers Commodity TotRet ETN | Swedish Export Credit Corp. |
| RJN | Elements Rogers Energy ETN | Swedish Export Credit Corp. |
| RJZ | Elements Rogers Metals ETN | Swedish Export Credit Corp. |
| SGG | iPath DJ AIG Sugar ETN | Barclays Bank, PLC. |
| SZO | PowerShares DB Crude Oil Short ETN | Deutsche Bank AG, London Branch |
| UAG | E-TRACS CMCI Agriculture TR ETN | UBS AG |
| UBC | E-TRACS CMCI Livestock Total Return ETN | UBS AG |
| UBG | E-TRACS CMCI Gold Total Return ETN | UBS AG |
| UBM | E-TRACS CMCI Industrial Metals TR ETN | UBS AG |
| UBN | E-TRACS CMCI Energy Total Return ETN | UBS AG |
| UCI | E-TRACS CMCI Total Return ETN | UBS AG |
| URR | Market Vectors Double Long Euro ETN | Morgan Stanley |
| USV | E-TRACS CMCI Silver Total Return ETN | UBS AG |
| WMW | Elements Morningstar Wide Moat Focus ETN | Deutsche Bank AG |
| © Copyright 2009, AllStarInvestor.com |
Note: BearLinx Alerian MLP Select ETN (BSR) is an unsecured note originally issued by Bear Stearns. Presumably, this note was assumed by J.P. Morgan Chase as part of their acquisition of Bear Stearns, however we were unable to verify.
U.S. ETN CLOSURES AS OF JAN. 27, 2009
| Ticker | Name | Disposition |
|---|---|---|
| EOH | Opta Lehman Agriculture Pure Beta ETN | Victim of 9/12/08 Lehman Bankruptcy |
| PPE | Opta S&P; Private Equity Notes 2038 ETN | Victim of 9/12/08 Lehman Bankruptcy |
| RAW | Opta Lehman Commodity Index ETN | Victim of 9/12/08 Lehman Bankruptcy |
| ADE | Elements Australian Dollar AUD/USD ETN | Closed 11/17/09 w/ orderly liquidation |
| CUD | Elements Canadian Dollar CAD/USD ETN | Closed 11/17/09 w/ orderly liquidation |
| EGB | Elements British Pound GBP/USD ETN | Closed 11/17/09 w/ orderly liquidation |
| ERE | Elements Euro EUR/USD ETN | Closed 11/17/09 w/ orderly liquidation |
| SZE | Elements Swiss Franc CHF/USD ETN | Closed 11/17/09 w/ orderly liquidation |
| © Copyright 2009 AllStarInvestor.com |
Disclosure: Long some of the listed securities.