From the March 01, 2010 issue of Futures Magazine • Subscribe!

ETFs, ETNs and ETVs explained

The ETF industry continues to evolve, and some experts argue that a reclassification is necessary. For example, Deutsche Bank analysts have recast ETFs as part of a larger class of “exchange-traded products” (ETP). Here’s how they differentiate the broader ETP category:


ETFs: Fund structures that issue shares traded on an exchange much the same way as equities. ETFs indexed to equity and fixed income benchmarks are registered under the investment company act of 1940. In the United States, equity and fixed-income ETFs employ physical index replication techniques. Use of OTC derivatives, such as total return swaps, is common with leveraged products.

Exchange-traded notes (ETN): Zero coupon senior unsecured, unsubordinated debt securities issued and underwritten by a financial institution or an asset manager. ETNs have a maturity date (typically, a long one, such as 30 years) and are backed by the creditworthiness of their issuer. Primary asset classes covered include equities, commodities and currencies. Issuers using ETNs include Barclays Capital, Claymore, Deutsche Bank, Goldman Sachs, HSBC, JP Morgan, Swedish Exports, Van Eck Funds, and UBS Securities.

Exchange-traded vehicles (ETV): Typically, grantor trusts in the United States investing in commodities or currencies. They differ from ETFs in that they are registered under the Securities Act of 1933 and not the Investment Company Act of 1940. Vehicles that replicate commodity benchmarks, more often known as pools, and funds targeting alternative index returns are formed under the Commodities Exchange Act and listed under the Securities Act of 1933 and report under 34 Corporates Act.

Source: Constandinides, C.; Lan, S.; Huang, Bo. “Exchange Traded Products: 2009 Market Review & 2010 Outlook,” Deutsche Bank.

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