Exchange Traded Products Flashcards

1
Q

Exchange Traded Funds (ETFs)

A

Index tracker funds listed and traded on major stock markets

Legal structure is a company.

Designed to match return on index they track (usually by fully replicating the index)

If full replication not used - known as sampling or optimisation

Some use swaps/synthetic replication

Valued daily

Trades close to NAV

No initial fees and typically lower OF and TER but brokerage fees on trades

No stamp duty on purchases

Income tax on dividend payments

CGT on disposal gains

Eligible for ISA inclusion

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2
Q

Exchange Traded Commodities (ETCs)

A

Pooled investment listed on LSE

Tracks performance of underlying commodity or basket of commodities or index

Traded and settled like normal shares

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3
Q

Exchange Traded Notes (ETNs)

A

Traded on stock exchange

Performance tracks movement of index

Type of bond issued by a bank (unsecured)

Additional risk as value affected by credit rating of issuer

Maturity date but don’t pay interest

No portfolio of investments

Use derivatives to track index instead of owning anything

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