Risky Business?: Clearing the Air

It's time to clear the air regarding the risks associated with ETPs.

  • Evaluating Counterparty Risk

    In any portfolio, it’s crucial to understand the source and extent of all types of risk—counterparty risk is no exception. So, when and where do exchange-traded products (ETPs) host counterparty risk? How can we identify and assess this risk?

  • Concentration Risk and Diversification

    Two of the most critical characteristics of any investment portfolio are its breadth and diversification. Importantly, diversification implies more than simply owning a large number of holdings: It means owning assets that will perform differently from each other. How does the tradeoff between concentration and diversification play out in ETPs?

  • Funded vs Unfunded Swaps and ETFs

    There are two different kinds of synthetic ETFs on the market today: unfunded and funded models. The type of counterparty risk each model offers is different, so it pays to understand how they work.

  • Securities Lending: Risk or Reward?

    Securities lending is a fairly simple process that can generate extra returns for ETF investors but it also introduces extra risk—however minimal.

  • ETP Legal Structures

    There’s a distinction in legal structure between two different types of exchange-traded products: exchange-traded funds (ETFs) and nonfund ETPs. Before highlighting the differences between the two legal structures, let’s remember the similarities...

  • Fund Regulation

    How are ETFs being regulated? How do I know if an ETP is "safe"? The guiding regulation for most European ETFs is the region’s “UCITS” fund framework. UCITS (“Undertakings for Collective Investment in Transferable Securities”) refers to a series of European Union directives passed since 1985.