Synthetic ETFs are exchange-traded funds that aim to track the performance of an underlying index or benchmark through the use of derivatives, such as swaps, rather than by holding the actual underlying assets. Synthetic ETFs are often used to provide exposure to assets that are difficult or expensive to hold directly, such as foreign stocks or commodities. The ETF enters into a swap agreement with a counterparty, typically a large financial institution, which agrees to pay the ETF the return of the underlying index in exchange for a fee. Synthetic ETFs can provide a convenient and cost-effective way to access certain markets and assets, but they also carry a higher level of counterparty risk, as the performance of the ETF is dependent on the ability of the counterparty to fulfill its obligations under the swap agreement. It is important to carefully consider the risks and potential rewards of synthetic ETFs and to understand the underlying mechanism before investing.