Produktspezifische Risiken von europäischen Exchange Traded Funds und Ansätze zur Risikominimierung

Abstract

Product Risks of European Exchange Traded Funds and Approaches to Risk Minimization

This article takes a closer look at the productspecific risks of European Exchange Traded Funds (ETFs) and presents approaches to risk minimization. Since the assets invested in ETFs by capital investment companies are classified as special asset funds, ETFs are often referred to as extremely lowrisk forms of investment. In spite of the classification as special asset funds, investors might nonetheless be confronted with risks arising from the structure of the ETFs. An analysis of the sources of productspecific risks including the Undertakings for Collective Investment in Transferable Securities (UCITS) and empirical data of European ETF issuers differentiates with respect to the structure of the underlying index (physical vs. synthetic replication). It may be regarded as a central result that physical ETFs are to be classified as less risky as a matter of principle, if the securities of the ETFs are not subject to lending or only in small proportion. Where ETFs are based on swap deals it is possible that the securities basket of the ETFs include securities deviating from the index. ETFs based on S&P 500 and FTSE 100 did not include any securities of the underlying for any of the issuers. (JEL G28, G32)