We see a lot of users ask us questions about the structure and safety of the investment products offered on the Oval Invest section. We believe this is an important topic that requires our attention so we would like to try to address the main concerns here.
Investing is an important decision and should be taken seriously so we are glad to help you go through these questions with clear and transparent answers.
What is an ETN?
- Lower costs than other investment funds
- Infinitely small investment amount, you can buy any amount of multiple assets
- Flexibility in building your portfolio
- Transparency in which assets the ETN is tracking
- Liquidity as they can be bought and sold daily
- Diversification through exposure to a group of assets instead of single ones
- Access to a wide range of themes and global markets
- Guarantor stability given the issuer risk is guaranteed. If the issuer defaults on the note, investors may lose some or all of their investment, although the guarantor covers this risk as long as it is able to meet its obligations to make payments to investors.
- Capital at risk as the ETN will follow performance of the underlying assets. The underlying asset can result in a loss of capital to investors.
- Past performance is no indication of future performance causing your investment to fluctuate up or down differently from previous years.
- Foreign currency risk as many investments are in underlying stocks are traded in different currencies than EUR.
Here are the characteristics of ETNs on Oval
- The ETNs on Oval behave exactly like ETFs. When you buy an ETN on Oval you buy a debt note that is asset-backed by the issuer, this means that the issuer buys the same amount of the actual financial assets on the market and holds them until you divest.
- The ETNs on Oval are registered*. They cannot be bought or sold on an outside exchange by using the app but, because of this, you do not have to open a trading account to hold your investments. Every time you trade, you do not have any extra costs from holding a custodian account and you have no counterparty risk of your custodian bank where you hold the investment.
- ETNs are personalized for Oval. We make sure tp create products that our users want to invest in, either because they want exposure to a certain market or because they believe in the mission driven theme of the product.
*a registered instrument is one which is recorded with the name of its owner, a bearer instrument is not registered to anyone and thus to be held by a person, it is usually stored in a custodian account in the name of the owner. The most common bearer instrument is cash. It is yours only if it’s in your bank account, if you lose 100$ on the street, it will be owed by whoever finds it. Shares in a private company are registered instruments. For example, when you invest in crowdfunding you have registered shares.
How are ETNs and ETFs different?
The main difference is that an ETF has a vehicle that is created as a fund and an ETN has an issuer of notes. With an ETF you buy a part of a fund (equity) and with an ETN you buy debt. Compared to ETFs, ETNs have a tax advantage as any loss can be netted from your capital gains to reduce your taxable capital.
There are 7,000 ETFs on the market, many of these are in USD and thus you have to buy them in this currency and hold them in a trading account. Finding one that fits your investment needs can be complicated. They often have difficult names and do not explain fully what the market theme or purpose they track is. In Oval we strive to find completely personalized investments for our community around the themes that you tell us you seek to have exposure to. We make the investments tailored to the community also based on the level of risk that our users want to take and the knowledge of the market.
Over the two years of Oval investment platform's life, users have had the opportunity to take their first steps into the world of finance and get to know it more. This is thanks to a curated selection of diversified ETNs that track a number of very different and uncorrelated themes.
An example: Keep it Green
There is an ETF on the market called iShares Global Clean Energy UCITS ETF created by BlackRock, one of the largest asset managers in the world. This is a very similar product to Keep it Green, an ETN available in Oval.
Let’s compare the KIIDS. As you can see form the table below, the investment exposure is very similar. The performance of the Global Clean Energy from September 2019 to September 2020 is over 70%, very close to the one year performance of Keep it Green at 69%. Keep it Green, however, has a much lower risk level, 3 vs 6, that we believe is more in line with our investor expertise in investments and their risk appetite. Moreover, Keep it Green is in Euro, meaning you don't need to involve a currency exchange to buy it. The costs are very similar when you account for the fact that you need a platform to buy the Global Clean Energy ETF and that they charge a commission or a spread fee on the price.
Oval does not provide investment advice and individual investors should make their own decisions. Seek the advice of a financial consultant if you are not sure about your investment. Your capital is at risk and the value of investments can go up as well as down and you may receive back less than your original investment: you should not invest money that you can’t afford to lose.