What is a primary feature of exchange traded notes (ETNs)?

A primary feature of exchange-traded notes (ETNs) is that they are designed to provide returns based on the performance of a specific debt index. This means that the value of ETNs is linked to the performance of the underlying index they are tracking, which may consist of various debt instruments. When investors purchase ETNs, they do not own the underlying assets directly; instead, they hold a promise from the issuer to pay a return that corresponds to the index's performance, often after a certain period.

This characteristic distinguishes ETNs from other investment vehicles, such as mutual funds, which are actively managed and hold a diversified portfolio of securities. ETNs are also not structured with fixed interest payments; rather, their returns are contingent on market performance, allowing for potentially higher returns but also higher risks. Although ETNs are traded on exchanges, their exchange-traded nature is a common feature shared with other security types, rather than a defining characteristic unique to them.