Equity-Linked Note (ELN)

An Equity-Linked Note (ELN) is a structured financial product that combines elements of a fixed-income security with the performance of an underlying equity asset, such as a stock or an equity index. ELNs provide investors with a fixed or variable return based on the performance of the linked equity, offering exposure to equity markets with potentially reduced downside risk compared to direct stock investment. ELNs are commonly issued by financial institutions and can be customized to meet specific investment objectives, such as capital protection or enhanced returns.

Example

An investor buys an ELN linked to the S&P 500 index, receiving interest payments plus an additional return based on the index’s performance over the note’s term.

Key points

• Combines fixed-income features with equity performance exposure.

• Offers returns based on the linked stock or equity index.

• Provides potential for growth with reduced downside risk compared to direct equity investments.

Quick Answers to Curious Questions

What is an Equity-Linked Note (ELN)?

An ELN is a structured product that offers fixed-income returns combined with exposure to the performance of an underlying equity asset.

How do ELNs provide returns?

ELNs provide returns based on a fixed or variable interest rate plus additional gains linked to the performance of a stock or index.

Why do investors choose ELNs?

Investors choose ELNs for the potential to earn higher returns than traditional fixed-income products while maintaining some exposure to equity markets.