Cash drains from ETNs in September

Investors pulled $581 million out of exchange traded notes in September, leaving a total $5.5 billion, according to the latest data from Morningstar Inc. of Chicago. ETNs are similar to exchange traded funds in that they follow an underlying index and trade on an exchange. ETNs do not hold securities, however. Instead, they are debt backed by an issuer, usually a bank. That structure allows ETNs to access such hard-to-reach market segments as commodities, but it is also one of the reasons ETNs have had a hard time recently. In the wake of the collapse of several banks, some investors are leery of the credit risk. “The more I thought about it, I realized I had to monitor credit risk, and I decided I didn't want to do that,” said Rick Miller, chief executive of Sensible Financial Planning and Management LLC in Cambridge, Mass., which oversees $170 million for clients, in the Sept. 22 issue of InvestmentNews.