Is the issuer of an ETF a risk to consider?
When it comes the price of an ETF, I understand that it reflects the value of the underlying assets.
What happens where a company that issues ETF comes into play on the decision of people whether to buy or not the specific ETF?
Let's say the ETF issuing company develops a "bad reputation" or even goes bankrupt. Or perhaps the competition drives people to buy other equivalent ETFs with lower fees.
Is this a realistic danger or is my thinking incorrect?
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Typically, and potentially as a requirement from the SEC, an ETF actually involves a small variety of separate legal entities.
Very basically:
the assets are held by some sort of custodial entity.
the management is performed a separately organized and operated legal entity.
Usually a management company will manage multiple ETFs. Should the management entity become insolvent the assets of the separate custodial entity are shielded.
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