Interview with ETF Stream: Synthetic ETFs come of age
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European investors have gradually accepted the efficiencies offered by synthetically replicated ETFs and could now benefit from a more granular understanding of the opportunities they offer and what it takes to run a synthetic platform.
In this interview, Ross Finlayson, head of markets and product strategy at Amundi ETF & Indexing explains the use case of synthetic structures in different markets, as well as their importance in providing cost-effective exposure where physical replication may prove complex or inefficient.
He also discusses how investors should assess total cost of ownership, identify when synthetic ETFs may be preferable to futures for tactical allocations, and how Amundi’s synthetics offering is positioning it as a leader in the European swap-based ETF market.
How is physical and synthetic ETF usage evolving across different equity exposures?
Historically, investors tended to choose either synthetic or physical ETFs in a rather simplistic way, but over time, both the market and investor understanding have matured significantly. There is now greater awareness of where each wrapper may have a competitive edge, and clients have become much more sophisticated in evaluating the drivers of performance and the rationale behind using one structure over the other.
The most notable area of growth in synthetic ETFs has been in US equities, where investors have benefited from performance uplifts driven by derivative replication, due to withholding tax advantages. Beyond the US, growth has also accelerated in emerging markets, where swap ETFs can overcome structural challenges such as high transaction taxes, different time zones, and restrictive currencies. In these cases, swap exposures can provide more efficient and cost-effective exposure. Another growing area is leveraged ETFs, which allow investors to achieve slightly nuanced outcomes that they would not have access to otherwise.
In short, the evolution has been defined by increased investor awareness, a broader range of use cases, and a deeper understanding of how each structure serves different market conditions and investment goals.
What are the important factors for investors to consider in synthetic ETFs from a total cost of ownership perspective?
Total cost of ownership is a quantitative measure encompassing performance and trading costs. Within performance, factors such as taxes, portfolio management costs, rebalancing costs, and securities lending all play a role. When comparing synthetic and physical ETFs, three key drivers typically determine outcomes: performance, market access, and trading costs.
Synthetic ETFs offer the potential for better performance in areas such as US equities and emerging markets where replication helps minimise taxes or transaction costs.
Market access is another major factor. Synthetic ETFs can efficiently replicate exposures that are otherwise difficult to access directly, such as commodities, where physical ownership of a barrel of oil or a block of silver is impractical.
Finally, trading costs can also favour synthetic ETFs. Investors do not have the same market access as a bank, and as a result banks are often better placed to make these transactions for investors.
It is important to note that not all swap ETFs are created equal. Investors should look for reputable issuers with robust, transparent processes and a proven track record. Partnering with an experienced provider that actively refines its approach can lead to greater reliability and risk management within synthetic structures.
What is the case for using synthetic ETFs over futures for tactical allocations in certain scenarios?
The decision between using synthetic ETFs and futures depends heavily on the investor. Many investors, particularly smaller institutions, may not have the permissions, infrastructure, or systems to manage futures directly. Synthetic ETFs effectively democratise access by allowing investors to gain similar benefits from derivative exposure.
Cost and liquidity are other important considerations. While futures such as S&P 500, Euro Stoxx 50 and FTSE 100 contracts are highly liquid, this liquidity diminishes quickly beyond the major indices. As investors move down the liquidity spectrum, futures become less efficient, often resembling negotiated swaps. Synthetic ETFs provide a consistent, funded structure, where each dollar invested represents fully collateralised exposure, unlike futures which require margin.
Additionally, synthetic ETFs typically reset their swaps semi-annually or annually, whereas futures change price every day. This means that with swap ETFs, investors know the performance they will receive over that period, which is not the case with futures.
Altogether, synthetic ETFs can offer clear benefits: market access for direct investors, while also delivering relative trade-offs that appeal to more sophisticated investors. When liquidity in futures is not a key advantage, performance and pricing efficiency can make swap ETFs a more effective option.
How does Amundi differentiate its synthetic ETF platform from other players in terms of breadth, structure and how swaps are rolled?
Amundi operates the largest synthetic ETF platform in Europe, managing over €120 billion across more than 100 products -- nearly double the size of the next largest provider.1 Despite its scale, many investors remain unaware of the platform’s full breadth and capabilities beyond a few large exposures.
It is also the most mature platform. Amundi technically launched its first swap ETF in the early 2000s through the CAC 40 ETF created by Lyxor. We have also successfully integrated two different synthetics platforms, Commerzbank and Lyxor, without any operational disruption. We are a tried and tested platform with nearly 25 years of history and no credit events of any kind.
Amundi distinguishes itself through its dedicated portfolio management team and the widest and the most diversified set of counterparties in terms of the assets managed across them. We also have a full in-house operating model allowing us to manage all swaps and risk processes internally, which is not the case for the majority of the industry. This gives us the flexibility to continuously improve our processes and to deliver a best-in-class model from a performance and risk perspective.
1. Amundi, Bloomberg as of 31/08/2025
Published by ETF Stream on 15 November 2025
Link to original article: https://www.etfstream.com/articles/synthetic-etfs-come-of-age
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