FSA warns on ETPs but omits to mention tracking error and hidden costs

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FSA factsheet warns of ETP dangers

The UK Financial Services Authority (FSA) has published a factsheet on exchange-traded products (ETPs) that says not all ETPs are suitable for all types of investor. It also highlights risks resulting from collateral and third-party involvement.

"[Exchange-traded products] may engage in transaction with third parties (such as using derivatives and securities lending), which results in the ETP being exposed to different assets or risks other than the risks of investing in the index," according to

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