Structural risk in etfs will always be there as they are not pure holdings of the underlying. For example, USO is a heavily followed (and traded) oil fund. Howe

Structural risk in etfs will always be there as they are not pure holdings of the underlying. For example, USO is a heavily followed (and traded) oil fund. However, it deals mostly in near term derivatives contracts, and it will continually underperform over time if the futures further out in time are priced higher then the near term futures. Other etfs with this problem are UNG and VXX and a host of others. Structural risk in sector etfs are most likely not as high as what this article states. Any market inefficiencies would most likely be fixed by arbitrage, and arb firms may explain the large amount of shorts in XRT for example. One of the major risks I see down the road is if gold actually does become a bubble. The major etf everyone watches is GLD, which does deal in physical gold. If a bubble hits its peak and redemptions come in, they will have to sell off some of that gold, which would accelerate the selling, providing a positive feedback loop-- which is what we normally see when a bubble crashes. Of course, all the risks I just mentioned, as well as the risks shown in the article, are spelled out in each etf's prospectus, so this is nothing new.