ETFs reduce risk through collateral management

Developed to deliver more accurate total return replication (by reducing tracking error to a benchmark index and lower costs associated with index rebalancing), swap based or synthetic ETFs are arguably the most successful innovation and currently represent more than 650 of the 1,000 plus ETFs available in Europe.  However swap based products have raised concerns over transparency and credit risks associated with possible swap counterparty default Collateral provides the answer - UCITS rules dictate that collateral has to be provided for  90% of the fund's net asset value where the swa...