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I think with a sufficient number of investors, this fund would correlate very strongly with the S&P 500 itself. So it should be relatively cheap for the issuer
by fauigerzigerk 7y ago
I think with a sufficient number of investors, this fund would correlate very strongly with the S&P 500 itself. So it should be relatively cheap for the issuer to simply buy the S&P 500 and enter into a swap agreement to cover any difference.
- Bootvis 7y agoUntil it's not and the fund manager goes bankrupt...
- fauigerzigerk 7y agoNo, just like with synthetic ETFs, there would be a number of swap counterparties that would have to cover the difference. If some of them fail (which is very unlikely), the damage would be limited to the difference between the actual portfolio and the S&P 500.