Morningstar has revealed several European ETF providers that do not 100% collateralize the holdings in their derivative-based funds, FundWeb reports. These firms include Amundi, db X-trackers, EasyETF, Lyxor, RBS and Source. Depending on the swaps synthetic ETFs utilize and the margin of safety offered to investors on top of regulatory demands, counterparty exposure changes greatly between providers. In the unfunded swap structure, counterparty exposure is between zero and 10% of the net value of the fund’s assets. Therefore, the value of the substitute baskets can range between 90% and 100% of the fund’s net asset value.
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