Barclays Global Investors, by far the dominant player in the exchange-traded fund market, has been offering a variation on the popular theme for the past two years, eight exchange-traded notes, and now Merrill Lynch plans to join the nascent market, Registered Rep reports.

An ETN is more tax efficient than an ETF because it is not required to distribute dividends to investors every year. It can also track indexes more closely and cost less because it owns a note tracking the benchmark  rather than individual stocks.

“The ETNs have been very successful with financial advisers and registered investment advisers,” said Philippe El-Asmar, head of investor solutions, Americas, for Barclays Capital.

But some in the industry aren’t so sure ETNs are a good alternative to ETFs. “ETNs are young, and it is not yet clear how they will perform over the long term,” said Gus Sauter, chief investment officer of Vanguard.

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