Investors are asking questions about the future direction of iPath ETNs and the health of parent bank Barclays according to Ian Salisbury and the Wall Street Journal.
According to the article Trouble at Barclays Raises ETN Worries, the recent decline in Barclays PLC’s share price is spreading worry that investors in iPath ETNs could face steep losses if the bank defaults. ETN investors have been wiped out in the past with the bankruptcy of Lehman Brothers.
According to Salisbury, Barclays dismissed the concerns pointing out that it expects to post a before-tax profit for 2008.
ETNs are junior, unsecuritized debt issued by banks with the promise to deliver a return that tracks a specific index. ETNs have proven useful in providing access to hard to reach asset classes such as India equities and Global Carbon credits.
A popular iPath ETN is the $500 million iPath S&P GSCI Crude Oil Total Return Index ETN (OIL). See the ETF MarketPro Directory for a complete listing of iPath ETNs.