Understanding Exchange Traded Funds

Exchange Traded Funds are now firmly established in the investment world. But how do they actually work? Originally designed as simple, user friendly, passive, Equity Index tracking vehicles, their evolution has created several different types of product, across the Asset Classes, with each one requiring different approaches in due diligence.


While the external ‘packaging’ might look similar, the risks underneath vary considerably.


  • Risk Managers
  • Regulators responsible for Fund Managers
  • Pension Fund Managers
  • Sovereign Wealth Fund Managers
  • Financial Journalists
  • New Financial Markets employees

Half day

Learning Objectives

  • ETFs & traditional Index Funds compared
  • Understanding ETFs, the replication mechanism
  • Synthetic Swap-based vs Physically backed ETFs – Counterparty risk
  • Primary (Redemption, Creation process) & Secondary markets
  • Authorised Participants, Portfolio Composition Files
  • Real time pricing & Arbitrage opportunities, Fees, Dividends
  • Tracking error measurement
  • Deciding on which ETFs to employ – structure, transparency, cost, liquidity
  • Core vs Satellite investing
  • ETF Variations on a theme – Inverse, Leveraged, Thematic, Active
  • ETFs on Commodities, Currencies, Bonds
  • Commodity ETFs – Issues to consider – Futures or Physicals?
  • Impact of behavioural factors on security market risk


This course has no prerequisites.

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