I traded ETFs and their synthetic equivalents professionally for about 6 months. Take this as an incomplete answer. As Zr40 said, they do have a large number of

I traded ETFs and their synthetic equivalents professionally for about 6 months. Take this as an incomplete answer. As Zr40 said, they do have a large number of non-synthetic ETFs, so I'm not sure if they actually do use synthetic ETFs, but I'll address your question independent of whether or not they do. A potentially major relative risk I can think of for synthetic ETFs vs real ETFs would be that it could diverge due to updates in the composition of the fund - particularly if a stock is removed or added. If the fund previously held a large position in a stock and decided to replace it, then that action will likely have a negative impact on the price of the stock, and you will only get knowledge of the fund adjustment the morning after or possibly later. This means when you readjust your synthetic position, you'll do so at inferior prices, which could hurt returns. Likewise, you'll probably buy new inclusions at a higher price. I saw this happen a couple of times - and usually within particularly volatile sectors with small cap companies where an ETF might come to hold a large chunk of a company. That being said, I'd wager this effect doesn't outweigh the management fees charged for even the most frugal ETF, so creating it synthetically might be a good deal if you've got the manpower and cost structure to adjust your position regularly - or if you don't mind a bit of divergence. I'd be interested to hear other opinions on this as well.