Wer von euch kann den grundlegenden Unterschied zwischen Finanzinstrumenten vom Typ ETF im Vergleich zu ETN und ETC angeben?
Bitte um eigene Äußerungen und Beobachtungen, ohne die von KI generierten Regeln zu kopieren.
Bitte um eigene Äußerungen und Beobachtungen, ohne die von KI generierten Regeln zu kopieren.
2 users upvote it!
2 answers
I don't know for sure, but as a passive investor in indices, I remember that I'm only interested in ETFs, and not all of them; however, Notes or Commodities are already completely passive (although I might remember it wrong)
I don't know for sure, but as a passive investor in indices, I remember that I'm only interested in ETFs, and not all of them; however, Notes or Commodities are already completely passive (although I might remember it wrong)
Machine translated
At the outset, I would like to point out that in the field of investing in capital markets, there can be no talk of any safety. This is a colloquial formulation, describing the subjective feelings of a specific person in various life situations (including those unrelated to investing), and not a measure of some factor present in the investment process.
In investing, we always, but always deal with RISK, in relation to which we are able to determine both its specific nature, formulate qualitative measures of its assessment, and specify a particular level of risk within the measures.
And this is precisely what distinguishes an ETF, or investment fund, from an ETC (debt secured/unsecured financial instrument) providing exposure to commodities/goods or baskets of the former, and from an ETN (debt secured/unsecured financial instrument) providing exposure to assets other than commodities/goods. So we can think of ETC/ETN somewhat like a specific corporate bond.
In relation to the discussed topic of ETF vs. ETC (using gold as an example) and ETN, it will specifically be issuer risk.
Credit risk will not occur for the discussed asset (gold), due to the lack of interest coupons that could potentially not be paid in the event of such a possibility. Similarly, with interest rate risk, which occurs for other types of bonds than ETC on gold with physical backing.
Can we really have difficulty formulating an appropriate conclusion regarding the type and level of risk concerning these two different in legal structure investment instruments (ETF vs. ETC/ETN)?
In the case of investment funds, we have a clear separation of the fund's assets from the assets of the fund provider, i.e., the investment company.
Therefore, in their case, the legal structure determines a very low level of issuer risk for investing, for example, in physical gold through an investment fund.
The same cannot be said for ETC (with exposure to the price of gold provided in a physical manner), where in the legal formula we are dealing with a secured debt financial instrument.
Alternatively, we can also have exposure to the price of gold, or another commodity through ETC, which uses futures contracts. Then we are talking about an unsecured debt financial instrument.
Thus, for ETC, the condition of the issuer itself is key for this “so-called bond.”
I personally have not encountered any information on the credit rating of the issuer of ETC/ETN (e.g., AAA, A-, AA, A+) on any of the ETF portals.
The greatest danger in the context of the discussed topic is that very few investors are even aware of the existence of issuer risk when obtaining exposure to a given asset through a debt instrument (ETC/ETN), rather than through an investment fund (ETF).
This is easiest to illustrate with the example of the bankruptcy of the company supplying both types of products.
In the case of an ETF, issuer risk is practically negligible, due to the legally regulated separation of the fund's assets from the assets of the investment company. The bankruptcy of the ETF issuer in this case will not cause the fund's assets to become part of the bankruptcy estate of the investment company that created the fund. The assets may be managed by another investment company (similarly to the case of Polish TFI).
However, in the case of ETC/ETN, issuer risk is crucial and in the case of niche financial institutions, it may turn out to be high or very high (A-, BBB), similarly to the issued discount structured certificates on the Warsaw Stock Exchange.
Although, for example, ETC on gold also has its “depository” (in the factual sense, and not legal, there is a separation of assets from the issuer, most often for industry reasons – the specifics of storing precious metal in a physically existing vault), the mere fact of having a “depository” does not protect the investor from the materialization of issuer risk due to the bankruptcy of the investment company issuing this debt instrument.
The bankruptcy trustee in the case of a debt financial instrument ETC/ETN may proceed to satisfy the claims of creditors from the physical gold deposit. In this case, gold will not “wait” in the “deposit” for a new manager, as is the case with the bankruptcy of the issuer of an investment fund (ETF).
At the outset, I would like to point out that in the field of investing in capital markets, there can be no talk of any safety. This is a colloquial formulation, describing the subjective feelings of a specific person in various life situations (including those unrelated to investing), and not a measure of some factor present in the investment process.
In investing, we always, but always deal with RISK, in relation to which we are able to determine both its specific nature, formulate qualitative measures of its assessment, and specify a particular level of risk within the measures.
And this is precisely what distinguishes an ETF, or investment fund, from an ETC (debt secured/unsecured financial instrument) providing exposure to commodities/goods or baskets of the former, and from an ETN (debt secured/unsecured financial instrument) providing exposure to assets other than commodities/goods. So we can think of ETC/ETN somewhat like a specific corporate bond.
In relation to the discussed topic of ETF vs. ETC (using gold as an example) and ETN, it will specifically be issuer risk.
Credit risk will not occur for the discussed asset (gold), due to the lack of interest coupons that could potentially not be paid in the event of such a possibility. Similarly, with interest rate risk, which occurs for other types of bonds than ETC on gold with physical backing.
Can we really have difficulty formulating an appropriate conclusion regarding the type and level of risk concerning these two different in legal structure investment instruments (ETF vs. ETC/ETN)?
In the case of investment funds, we have a clear separation of the fund's assets from the assets of the fund provider, i.e., the investment company.
Therefore, in their case, the legal structure determines a very low level of issuer risk for investing, for example, in physical gold through an investment fund.
The same cannot be said for ETC (with exposure to the price of gold provided in a physical manner), where in the legal formula we are dealing with a secured debt financial instrument.
Alternatively, we can also have exposure to the price of gold, or another commodity through ETC, which uses futures contracts. Then we are talking about an unsecured debt financial instrument.
Thus, for ETC, the condition of the issuer itself is key for this “so-called bond.”
I personally have not encountered any information on the credit rating of the issuer of ETC/ETN (e.g., AAA, A-, AA, A+) on any of the ETF portals.
The greatest danger in the context of the discussed topic is that very few investors are even aware of the existence of issuer risk when obtaining exposure to a given asset through a debt instrument (ETC/ETN), rather than through an investment fund (ETF).
This is easiest to illustrate with the example of the bankruptcy of the company supplying both types of products.
In the case of an ETF, issuer risk is practically negligible, due to the legally regulated separation of the fund's assets from the assets of the investment company. The bankruptcy of the ETF issuer in this case will not cause the fund's assets to become part of the bankruptcy estate of the investment company that created the fund. The assets may be managed by another investment company (similarly to the case of Polish TFI).
However, in the case of ETC/ETN, issuer risk is crucial and in the case of niche financial institutions, it may turn out to be high or very high (A-, BBB), similarly to the issued discount structured certificates on the Warsaw Stock Exchange.
Although, for example, ETC on gold also has its “depository” (in the factual sense, and not legal, there is a separation of assets from the issuer, most often for industry reasons – the specifics of storing precious metal in a physically existing vault), the mere fact of having a “depository” does not protect the investor from the materialization of issuer risk due to the bankruptcy of the investment company issuing this debt instrument.
The bankruptcy trustee in the case of a debt financial instrument ETC/ETN may proceed to satisfy the claims of creditors from the physical gold deposit. In this case, gold will not “wait” in the “deposit” for a new manager, as is the case with the bankruptcy of the issuer of an investment fund (ETF).
Machine translated