New Currency ETNs from Barclays

Barclays has announced the launch of 3 new Exchange Traded Notes (ETNs). As we discussed in our past postings, ETNs trade like stocks or Exchange Traded Funds (ETFs), but they're debt instruments, meaning that investors are exposing themselves to risk that the issuing bank will go bankrupt.

Barclays already had other currency ETNs in its product lines: iPath EUR/USD Exchange Rate ETN (ERO) , iPath GBP/USD Exchange Rate ETN (GBB) and iPath JPY/USD Exchange Rate ETN (JYN) . The new ETNs are:

The Carry Trade ETN: The carry trade involves borrowing money in low-yielding currencies and investing it in high-yield currencies. This fund involves using long and short forward positions in G10 currencies to execute the trade. Among others, the index has holdings in the Norwegian krone, New Zealand dollar, Swiss Franc and Australian dollar. The fund has an expense ratio of 0.65%.

Barclays GEMS Strategy: GEMS stands for Global Emerging Markets Strategy. The fund is a 15-currency money market account that covers five geographic zones, including Eastern Europe, Africa and Latin America. It has a 0.89% expense ratio.

Asian and Gulf Revaluation: This one has exposure to five Middle Eastern and Asian market currencies that are tied to the U.S. dollar. It carries an expense ratio of 0.89%.

Readers should, however, take note of a related IRS ruling that these currency ETNs should be taxed as debt, and that gains from interest income and currency appreciation will be taxed as regular income tax.