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Most of the money is tracking indices, your 11% figure obviously can't be true because even most physically replicating ETFs don't 1-1 hold all of the assets th

Most of the money is tracking indices, your 11% figure obviously can't be true because even most physically replicating ETFs don't 1-1 hold all of the assets they purport to hold according to the index. That's called "sampling". Fully replicating ETFs are rarer and more expensive for obvious reasons. You can see the figures for the EU here¹, it's the exact opposite of what you're saying. Fully physically replicating ETFs are in the minority. The most common category is fully synthetic and together with the physically sampling ones and more exotic categories like derivative based, non-fully physically replicating ETFs constitute almost 3/4 of the entire market. The US is going to be similar but I invite you to look it up yourself. ¹ https://www.esrb.europa.eu/pub/pdf/asc/esrb.asc190617_9_canetfscontributesystemicrisk~983ea11870.en.pdf https://www.esrb.europa.eu/pub/pdf/asc/esrb.asc190617_9_cane...

blitzar 4y ago
The federal reserve [0] and nasdaq [1] disagrees with your assesement - 2% of global etf assets are held in synthetic etfs - almost entirely in Europe and all but extinct in the US. [0] https://www.federalreserve.gov/econres/notes/feds-notes/synthetic-etfs-20170810.htm https://www.federalreserve.gov/econres/notes/feds-notes/synt... [1] https://www.nasdaq.com/articles/what-are-synthetic-etfs-2021-09-22 https://www.nasdaq.com/articles/what-are-synthetic-etfs-2021... > can't be true because even most physically replicating ETFs don't 1-1 hold all of the assets they purport to hold according to the index Unfortunately they do hold the assets they purport to hold.
saryant 4y ago
Sampling doesn’t imply synthetics. It just means that at the small end of their index they don’t bother to hold everything because the cost of doing so is too high. This is only an issue with niche ETFs or total market ETFs where the tail end of the index represents some tiny minuscule fraction of the fund. Nobody uses sampling for, say, an S&P500 fund.
- trompetenaccoun 4y ago
  The user claimed: >ETFs, hold the thing they are convertable to and are audited. the equivalent would be the stable coin having $1 in a bank account for every stable dollar they mint ... and be willing to be audited. That is demonstrably false for the majority of ETFs, just read the above link. Holding some of the thing is not the same as being fully convertible. The user doesn't understand what sampling is and fixates on the word "synthetic" but it wasn't the original claim that most ETFs are fully synthetic in the first place. They don't have to be synthetic to not be 1-1 backed by all index constituents. That isn't a claim about this being good or bad, many investors consider it acceptable risk.
  - blitzar 4y ago
    jeez... fine so i rounded to the third decimal place (i am clearly retarded) 1:0.9994 You happy? https://www.marketwatch.com/investing/fund/spy/holdings https://www.marketwatch.com/investing/fund/spy/holdings And to further correct the reccord: the equivalent would be the stable coin having $0.9994 in a bank account for every stable dollar they mint not $0 (the $0.0006 was really the important bit in all this)
    - trompetenaccoun 4y ago
      Yes, I agree with your self-assessment. Why don't you just read what sampling means? https://www.investopedia.com/articles/investing/111715/how-vanguard-index-funds-work.asp#toc-index-sampling https://www.investopedia.com/articles/investing/111715/how-v... The very fund you linked is exactly not fully replicating. Meaning some of the stocks from the index aren't in it.
      - blitzar 4y ago
        > Meaning some of the stocks from the index aren't in it. Which stocks specifically? Their daily reporting has them owning every stock in the index. https://www.ssga.com/us/en/intermediary/etfs/library-content/products/fund-data/etfs/us/holdings-daily-us-en-spy.xlsx https://www.ssga.com/us/en/intermediary/etfs/library-content...

blitzar 4y ago

The federal reserve [0] and nasdaq [1] disagrees with your assesement - 2% of global etf assets are held in synthetic etfs - almost entirely in Europe and all but extinct in the US. [0] https://www.federalreserve.gov/econres/notes/feds-notes/synthetic-etfs-20170810.htm https://www.federalreserve.gov/econres/notes/feds-notes/synt... [1] https://www.nasdaq.com/articles/what-are-synthetic-etfs-2021-09-22 https://www.nasdaq.com/articles/what-are-synthetic-etfs-2021... > can't be true because even most physically replicating ETFs don't 1-1 hold all of the assets they purport to hold according to the index Unfortunately they do hold the assets they purport to hold.

saryant 4y ago

Sampling doesn’t imply synthetics. It just means that at the small end of their index they don’t bother to hold everything because the cost of doing so is too high. This is only an issue with niche ETFs or total market ETFs where the tail end of the index represents some tiny minuscule fraction of the fund. Nobody uses sampling for, say, an S&P500 fund.

trompetenaccoun 4y ago
The user claimed: >ETFs, hold the thing they are convertable to and are audited. the equivalent would be the stable coin having $1 in a bank account for every stable dollar they mint ... and be willing to be audited. That is demonstrably false for the majority of ETFs, just read the above link. Holding some of the thing is not the same as being fully convertible. The user doesn't understand what sampling is and fixates on the word "synthetic" but it wasn't the original claim that most ETFs are fully synthetic in the first place. They don't have to be synthetic to not be 1-1 backed by all index constituents. That isn't a claim about this being good or bad, many investors consider it acceptable risk.
- blitzar 4y ago
  jeez... fine so i rounded to the third decimal place (i am clearly retarded) 1:0.9994 You happy? https://www.marketwatch.com/investing/fund/spy/holdings https://www.marketwatch.com/investing/fund/spy/holdings And to further correct the reccord: the equivalent would be the stable coin having $0.9994 in a bank account for every stable dollar they mint not $0 (the $0.0006 was really the important bit in all this)
  - trompetenaccoun 4y ago
    Yes, I agree with your self-assessment. Why don't you just read what sampling means? https://www.investopedia.com/articles/investing/111715/how-vanguard-index-funds-work.asp#toc-index-sampling https://www.investopedia.com/articles/investing/111715/how-v... The very fund you linked is exactly not fully replicating. Meaning some of the stocks from the index aren't in it.
    - blitzar 4y ago
      > Meaning some of the stocks from the index aren't in it. Which stocks specifically? Their daily reporting has them owning every stock in the index. https://www.ssga.com/us/en/intermediary/etfs/library-content/products/fund-data/etfs/us/holdings-daily-us-en-spy.xlsx https://www.ssga.com/us/en/intermediary/etfs/library-content...