The XIV ETN has officially terminated. Investors lost about 95% of their initial investment. Was this a one-off event or do we need to be taking a closer look at ETF risks and other Exchange Traded Products?

 

In this episode, I continue the discussion with my Wall Street friend George, moving the discussion into the risks of Exchange Traded Products. George is part of the next generation Wall Streeters otherwise known as ‘quants’; a brainy sort inclined towards the application of higher math in the finance world. He studied physics and math in school before jumping into an investment bank and then the buy-side as a fixed income analyst at a very large bond fund. We delve into the risks of Exchange Traded Products and what you should be on guard against when investing in them.

 

We touch on:

-Explaining what XIV was

-Clarifying the difference between ETF’s (Exchange Traded Funds) and ETN’s (Exchange Traded Notes)

-Hidden risk factors of Exchange Traded Products

-Liquidity risk

-Synthetic asset risk

-Default risk

-Tracking error risk

-Exotic risks

 

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