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Exchange Traded Notes (ETNs)  

Exchange Traded Notes (ETNs) are designed to provide investors with an investment opportunity to access the returns of market benchmarks or strategies.

ETNs are not equities or index funds, but they are listed on an exchange, similar to index funds and linked to the return of a benchmark index or price.

Absa Corporate and Investment Bank has established the NewWave ETN Programme that:

  • Will give investors exposure to the performance of various asset classes, including commodities and currencies
  • Is an issuance programme of Absa Bank Limited (Absa Bank) in terms of which various classes of ETNs are issued and listed on the JSE Limited
  • Offers ETNs that constitute unconditional, unsecured and unsubordinated obligations of Absa Bank.

Benefits:


  • An ETN will give exposure to various asset classes in difficult to reach markets
  • Performance directly tracks the reference index or price (less investor fees)
  • Cost effective way to invest in asset classes not previously accessible 
  • Easy to trade and several ETNs can be intraday traded 
  • Relatively small tracking error due to investor fees payable.

Risks:

ETNs will rise and fall in value according to the market changes of the reference index or price it tracks. As with ETFs, ETNs are not capital protected therefore, depending on the market movements during your investment period, you are not guaranteed to get back your full investment when you decide to sell your total investment.

Risks of trading ETNs include:

  • Issuer credit risk
  • General market risks
  • Interest rate risks
  • Exchange rate risks
  • Inflationary risks
  • Liquidity risks
  • Legal and regulatory risks.

Also refer to the ETN programme documentation for a more comprehensive list of risks.

  NewWave ETNs NewFunds ETFs
Liquidity Daily on exchange Daily on exchange
Resource Issuer credit Portfolio of assets
Principle risk Market and Issuer risk Market risk
Tracking error Low tracking error (only fees) Larger tracking error (fees and rebalancing costs)
Issuer Subscription Both Subscription and Redemption in block size Both Subscription and Redemption in block size
Pricing and trading Market maker on the exchange Market maker on the exchange

Why are ETNs different?

General product features common to ETFs and ETNs are:

  • Listed and exchange traded
  • Easy accessible investment vehicles for a wide range of asset classes
  • Low tracking error
  • Exposure to market risk of the asset class/index.

Specific features of ETNs are:

  • Investor owns a note, exposing the investor to counterparty risk of the note issuer
  • More flexibility to issue products for example a basket of commodities, single commodities and currencies.
Copyright 2013 Corporate and Investment Banking, Absa. All Rights Reserved. Corporate and Investment Banking is a division of Absa Bank Limited, Reg No. 1986/004794/06. Authorised Financial Services Provider. Registered Credit Provider Reg No NCRCP7.