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WestLB issues first Index Plus Exchange Traded Notes

WestLB is issuing Exchange Traded Notes for the time. The first ETN (WKN ETN1WL) is a so-called Index Plus ETN, which mirrors precisely the performance of the underlying plus an Index Plus Rate of 0.2% p.a. The ETNs were admitted to trading in the ETN segment of the Frankfurt Stock Exchange (Xetra) on April 22, 2010. They offer investors a particularly narrow bid and offer spread. No management fees will be charged.

WestLB’s new Index Plus ETN is the first ETN in Germany to pay a yield premium on the index performance. This is attributable to the fact that, legally speaking, ETNs, unlike Exchange Traded Funds (ETFs), are bearer bonds whose repayment depends on the issuer’s ability to pay. The risk borne by investors in their capacity as creditors of the issuer is compensated by the additional yield premium. Being bearer bonds, ETNs – like certificates – are covered by the protection scheme of the Sparkassen-Finanzgruppe, which protects customers’ deposits with member banks (like WestLB); this means that the ETNs are fully secured.

The new products are primarily targeted at institutional investors, high net worth private clients and asset managers who want to use ETNs as a low-cost and flexible instrument for a basic investment on the DAX. Unlike ETFs, which usually incur management fees and pay no yield premium on the index, WestLB’s new ETNs even generate an excess return on the underlying. Thanks to the narrow bid and offer spread, ETNs are also an attractive alternative for traders who expect a positive performance of the DAX.