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Fund Spy

New Exchange-Traded Notes Are No Gimmick

Barclays offers innovative commodity securities that trade like ETFs.

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Many of the so-called new ideas pitched in the last couple of years by exchange-traded fund families actually are old notions dusted off and repackaged as ETFs. For every ETF that tracks a fundamentally weighted or heretofore inaccessible asset class, there are several more sector and industry funds; slicing the stock market into ever-narrower segments is not the most imaginative investment strategy.

So, it's noteworthy when an ETF purveyor comes up with a truly innovative idea. Barclays Global Investors' (BGI) new iPath exchange-traded notes are among those envelope-pushing concepts worth examining. It's a debt security that can be bought, sold, and shorted like a stock and can be used to track otherwise hard-to-get-at asset classes, such as commodities and some types of bonds.

The first two iPath ETNs track commodity indexes, though Barclays is sure to roll out more ETNs tracking other benchmarks and asset classes. There still are a lot of questions about how these securities, which have been trading for about a month, will behave and be taxed over the long term, but here's an early read on them.

Dan Culloton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.