The continued growth in the US Exchange Traded Product (ETP) space has over-shadowed an interesting development – the decline in ETN (Exchange Traded Note) issuance. The chart below shows the number of ETNs issued in the US by calendar year, including those that subsequently closed.
We see some interesting trends:
- The first half of 2008 was clearly the first boom period, with 53 ETN launches. However, every one of those was launched in the 1st half of the year. With an ETN, the investor is taking on the credit risk of the issuing bank and so the peaking of the financial crisis in the second half of 2008 put a chill on the ETN market.
- The market seemed to thaw in 2009 and then ETN issuance picked up again in 2010, peaking at 76 launches in 2011.
- Since then however, there has been a steep secular decline in ETN issuance.
It is not hard to see why. As we can see in the table below, while ETNs accounted for 13% of the ETPs listed in the US as of end Q1’14, they only gathered 1.4% of the total assets.
Given this drop in ETN issuance and the continued asset gathering momentum in more traditional ETPs, it seems likely to stay this way for the foreseeable future.