ETF variants

While most exchange-traded funds (ETFs) share a common structure (how ETFs work), some are structured differently for a variety of historical or legal reasons. For example:

  • Trusts. Some commodity and currency ETFs, for example, are structured as ‘grantor trusts,’ rather than ‘open-end investment companies’ like most ETFs. The trust structure is more suitable for holding a single asset, such as gold bars, rather than a basket of stocks.
  • HOLDRs. Holding Company Depositary Receipts, managed by Merrill Lynch, are exchange-traded baskets of securities focused on specific industry sectors. But unlike most ETFs, HOLDRs can only be bought and sold in 100-share increments, and can also be sold directly back to the fund sponsor in exchange for the underlying shares. Also unlike most ETFs, HOLDRs portfolios are fixed (they don’t change once established).