Synthetic ETFs: true villains or just misunderstood?

As the eurozone crisis came to a crunch over the summer, some of Europe’s biggest banks saw a dramatic widening of their credit default swaps (CDS) as well as credit downgrades. Given the role of some of the worst-affected banks as swap-counterparties in synthetic ETFs, investors have been asking what impact these developments have on counterparty risk. The protections offered by Ucits and providers own collateralisation and resetting policies have come into sharp focus. Questions also remain about whether providers using a single swap counterparty, particularly where both exist within t...