Do ETFs have counterparty risk?

Discussion in 'ETFs' started by 0008, Jan 4, 2015.

  1. 0008

    0008

    Companies can collapse. Bonds can default. Do ETFs have similar risk?
     
  2. Trader13

    Trader13

    I haven't heard of credit risk with ETF's since they generally hold a basket of securities. But ETN's (Exchange Traded Notes) are structured with unsecured debt and have credit risk of default. I'm not aware if it's ever happened, though.
     
  3. 0008

    0008

    How about those leveraged ETFs?
     
  4. Butterball

    Butterball

    Lehman was issuing ETNs in UK, Germany and Hong Kong and probably other jurisdictions. Later this went before courts and Lehman lost some judgments as they failed to warn (retail) investors of the risks associated with these ETN like products.
     
  5. Trader13

    Trader13

    They are still ETF's and their basket may include futures or options to gain the leverage. Credit risk isn't so much the issue with leveraged ETFs as the roll yield can impact long term holdings.
     
  6. Everything has some counterparty risk. The question is how much risk.
     
  7. 1245

    1245

    Almost none. The big risk is that they calculate NAV wrong.
     
  8. I agree ... risk is truly minimal.
     
  9. hft_boy

    hft_boy

    Heaven forbid. Between the SIP pricing scheme (does anyone actually know how .IV is calculated?) and the laxness of the standard reporting it's a miracle anybody calculates NAV *correctly*.