Exchange Traded Funds (ETFs)
Because investment funds usually measure themselves against a reference index such as the German DAX or the American Dow Jones Index, funds have been developed which simply track an index, doing away with the need for management and the associated fees.
They are usually traded via stock exchanges and for that reason are called exchange traded funds (ETFs). Today there are thousands of them, and transparency is an important selection criterion. This is because many index funds do not actually hold the corresponding shares and bonds in their portfolio, but instead track them using SWAPS (Synthetic ETFs).
In both actively managed investment funds and passive ETFs, the bonds and shares are lent out in order to generate additional returns for the fund company itself. This leads to greater risk, for which the shareholder is only partially compensated – if at all. With fully physically replicating ETFs, these loans can even be accessed and viewed via the Internet.