El-Asmar: I think it's a trend that has been set by us since we were the first to market commodities ETNs. Since the launch of DJP [iPath Dow Jones-AIG Commodity Index Total Return ETN], different banks have tried to break into the ETN space, and they've piggybacked on this success. Now the ETN structure is almost the preferred route for investing in commodities between the two vehicles, although I would just moderate that by pointing out that the ETF GLD has close to $20 billion. My comments were more in regard to broad-based commodity indices rather than specific commodities or commodities sectors.

The reason why we came up with the ETNs linked to commodities is because we were on the investment banking side and servicing a lot of institutional clients that could access commodities. But for regular investors, there was no simple choice. The same feedback was being collected from BGI for a long period of time from the various clients that invest in ETFs; they were asking for that asset class as a good way of diversifying the portfolio allocation and benefiting from the commodities markets' performance as well as for other reasons, such as potentially hedging against inflation.

IU: Beside being first to market, what are the iPaths' main competitive edges in the ETN industry?

El-Asmar: For one, quality of the issuer: Barclays is one of the best-viewed and highest-rated financial institutions in the world. I think that does matter in terms of mitigating the credit risk. There's also the fact that we offer daily creation and redemption versus weekly. I think that provides again another competitive advantage, which mitigates some of the credit risk for investors. With that, you only have an overnight risk on an AA-rated entity. There's also the wide range of choices across asset classes like commodities, currencies and emerging markets equities as well as strategies. We're providing the most complete menu compared to any of the other providers.

IU: Is INP [iPath MSCI India Index ETN] ever going to return to fully normal operations?

El-Asmar: We are diligently working with the Indian regulators on finding a solution on this.

IU: In light of the IRS ruling on currency ETNs, is Barclays' strategy going to be changed in regard to any currency ETNs it releases in the future?

El-Asmar: We have launched an ETN linked to a currency index called the Barclays Intelligent Carry Index. Outside the ETN space, more in the structured investment space, we've done a lot of principle-protected investments linked to baskets of currencies and products along those lines. Some of the ETNs that we've created pay income; others are still just growth. We're considering a fuller suite of exchange-traded notes with an income-embedded feature.

IU: Did the ruling have an effect on the existing currency iPaths? Did it hurt them in any way or is it just something that investors accepted and that was that?

El-Asmar: The assets under management on the three currency ETNs we have are still at a similar level as what they were before the ruling; for the moment, it has remained constant.

Philippe El-Asmar is a managing director and the head of investor solutions, Americas for Barclays Capital. IndexUniverse.com assistant editor Heather Bell spoke with him recently about the iPath family of ETNs and how the overall ETN market is developing.

1 | 2 | 3 |