The US model followed by ETF managers , using a database of physical assets to track an index , appears to be winning in terms of popularity versus the European model of synthetic funds , which use derivatives to replicate asset values . The trend by investors to opt for physically - backed funds has seen the market share for synthetic replicated funds drop to 50 % , a ten - year low .
The US model followed by ETF managers, using a basket of physical assets to track an index, appears to be winning in terms of popularity versus the European model of synthetic ETFs, which use derivatives to replicate index returns. The trend by investors to opt for physically-backed funds has seen the market share for synthetic replicated fund drop to 25%, a ten-year low.