Exchange-Traded Note (ETN)
An unsecured bank-issued debt security that tracks an index and trades on an exchange, carrying issuer credit risk.
What is ETN?
An exchange-traded note (ETN) is an unsecured debt security issued by a bank or financial institution that tracks the performance of a market index, commodity, or strategy. Unlike ETFs, ETNs do not hold underlying assets — they are senior unsecured notes, meaning investors bear the credit risk of the issuer. ETNs trade on exchanges like stocks and offer access to asset classes that are difficult to replicate with a fund structure.
Example
The iPath Bloomberg Commodity Index ETN allows investors to gain broad commodity exposure without owning physical assets. However, during the 2008 financial crisis, investors in Lehman Brothers-issued ETNs faced potential total loss when Lehman filed for bankruptcy, highlighting the credit risk unique to ETNs versus ETFs.