• This article outlines the key differences between ETFs and ETNs and explains what ETPs are.
• The information is intended for asset managers looking to expand their investment strategies with exchange-listed products.
• FlexFunds offers an asset securitization program for issuing ETPs that help optimize strategy distribution. For more information, feel free to contact our experts.

When building investment portfolios, asset managers and advisors often consider adding ETFs and ETNs, products that fall under the broader category of ETPs. And while many wonder, “Is an ETN an ETF?”, they are not and come with clear differences.

Is an ETN an ETF? Navigating the Universe of Exchange-Traded Products Landscape

An exchange-traded product (ETP) is a security that mirrors the performance of an underlying asset or index and trades on an exchange like a stock.

These instruments offer convenient, liquid, and cost-effective exposure to a wide range of assets without requiring direct ownership of the underlying holdings.

Although there are many types of ETPs, the most notable are ETFs (exchange-traded funds) and ETNs (exchange-traded notes).

Context Behind the Popularity of ETPs

New ETFs and ETNs continue to emerge, making it easier to access complex markets and further boosting their popularity.

For this reason, ETPs in Europe alone reached a record USD 3 trillion in assets under management (AUM) in the third quarter of 2025.

According to the Exchange-Traded Europe Q3 2025 report by HANetf, Europe accounts for just over one-sixth of the USD 17.9 trillion in exchange-traded products (ETFs and ETPs) managed globally, based on data through August 31, 2025.

ETF: Fundamentals, Advantages, and Structure

ETFs are investment funds that trade on an exchange. They pool capital from many institutional investors to purchase a diversified basket of assets that track a benchmark index.

Unlike a traditional mutual fund, an ETF allows these institutional investors to buy and sell shares in real time, just like trading regular stocks.

Legal Structure

Legally, ETFs are typically structured as collective investment funds. In Europe, they are regulated under the UCITS directive, which sets diversification limits and requires independent asset custody .

In practice, an ETF’s shares are backed by the securities it holds, which are held by a custodian  separate from the fund manager.

As a result, if the management company goes bankrupt, the ETF’s assets do not become part of the manager’s balance sheet, helping protect investor capital.

Key Benefits of ETFs

ETFs offer several key advantages for asset managers and professional investors:

• Instant diversification: With a single ETF, institutional managers can gain exposure to an entire underlying index, reducing concentrated risk.
• Low costs: ETFs generally have much lower management fees compared to actively managed funds.
• Intraday liquidity: They trade in real time on exchanges like any stock, allowing managers to enter or exit positions quickly.
• Transparency: Holdings are usually disclosed daily, making it easy to track the underlying assets.
• Strong regulation: As UCITS funds, they offer additional legal protections (independent custody, exposure limits, external audits).

ETN: How They Work as Unsecured Debt Instruments

ETNs, on the other hand, are unsecured debt securities. Unlike ETFs, they don’t hold the underlying assets. Instead, the issuer promises to pay investors the return of a specific index or asset (minus fees) at a future date.

Exposure to the Issuer’s Credit Risk

The main additional risk with an ETN is the issuer’s solvency. Because it is unsecured debt, the ETN depends entirely on the issuing bank’s ability to honor its commitment.

If the issuer goes bankrupt or its credit rating deteriorates, the value of the ETN can drop sharply or even be lost entirely, even if the underlying index is performing well.

Specific Advantages of ETNs

Even so, ETNs offer several key benefits:

• Near-zero tracking error: Since the index isn’t replicated physically, the ETN issuer theoretically guarantees payment of the exact index value (minus fees).
• Access to complex indexes: They make it possible to invest in indexes or assets that would be difficult to replicate through a traditional ETF.
• Tax efficiency: In some jurisdictions, ETN gains are deferred until the sale or maturity, as they don’t distribute dividends or interest directly.

Detailed Analysis: Is an ETN an ETF?

In practice, both ETFs and ETNs offer index exposure and trade intraday on an exchange, which often leads investors to wonder, Is an ETN an ETF? 

Despite the similar market behavior, their internal structure and risks differ significantly. An ETF is a fund that buys and holds assets, such as stocks or bonds, based on the index it tracks, while an ETN is an unsecured debt instrument that promises the index’s return without actually holding the underlying assets.

That’s why ETFs are mainly exposed to market risk and index-tracking risk, while ETNs add issuer credit risk to the equation.

Both vehicles can be useful in passive portfolios or for specific strategies, but their suitability depends on the asset manager’s priorities regarding security, costs, and taxation.

Similarities

• Index replication: Both aim to mirror the performance of a benchmark asset or index (e.g., S&P 500, Euro Stoxx, etc.).
• Exchange trading: They can be bought and sold on exchanges throughout the trading day, offering high liquidity.
• Low operating costs: In general, both ETFs and ETNs have lower expense ratios than traditionally managed funds.
• Built-in diversification: Either option can provide exposure to a wide set of assets in a single transaction (for example, an entire sector or a foreign market).

When to Choose Each Instrument

ETFs are commonly used for buy-and-hold strategies, broad index investing, and for institutional investors who prefer their assets to be held by an independent custodian rather than the fund manager.

They are also well-suited for institutional structures aiming to replicate indexes efficiently, such as long-term investment mandates.

On the other hand, in scenarios that require exposure to more complex strategies and where the issuer’s credit risk is deemed acceptable, ETNs can be an effective tool within certain institutional frameworks.

For example, if the goal is to track a difficult-to-replicate index (e.g., exotic commodities, volatility strategies, or cryptocurrencies) or to defer taxes on gains, an ETN can be advantageous.

To learn more about FlexFunds’ ETP offerings, feel free to contact our team. We’ll be happy to assist.

Sources:

• https://finance.yahoo.com/news/european-etp-market-surpasses-3-233102068.html
• https://www.investopedia.com/financial-edge/0213/etf-or-etn-whats-the-difference.aspx
• https://www.rankia.com/blog/etf/1792813-diferencia-etfs-etcs-etns
• https://www.oroyfinanzas.com/2015/05/cual-diferencia-exchange-traded-funds-etf-exchange-traded-note-etn/
• https://blog.myinvestor.es/productos-cotizados-diferencias-entre-etf-etp-etc-y-etn/
• https://financefeeds.com/es/what-are-exchange-traded-products-etps-explained/