investment companies outline

Exchange traded notes

• unsecured senior debt securities
• issued by bank or broker/dealer
• Barclays issuer
• JP Morgan issuer
• no credit rating for notes
• issuer has credit rating
• promise to pay a certain amount by a certain time
• issued at set price and amt paid at maturity=purchase price=capital gain or loss
• capital gain or loss at sale
• hold ETN till maturity get one time payment based on performance
• can be sold before maturity in open market
• investor pays net asset value w/ commission
• track indexes or stock portfolios 
• track commodities, currencies, stocks with volatility
• index perform well, ETF perform poorly
• profit: value of stocks decrease &  ETN has short position
• lose: stocks decrease and ETN is long index
• lose everything: ETN goes bankrupt
• Securities Act of 1933 issues ETNs
• Investment company act of 1940 issues ETFS
• ETFs, redeem any day to issuer
• ETN, redeem any week to issur
• diversification-stocks, bonds, commodities
• investor buys debt from issuer
• similarity: ETF and ETN a)trade on market on daily basis
• similarity: ETF and ETN a)buy them on margin, can be sold short
• benefits ETN: a)invest in more types of markets than small investor usually can afford b)use as hedging