synthetic fund

synthetic fund
A type of futures and options fund where the fund is designed to perform in accordance with an index, often a stock index such as the FTSE 100. It does not invest in the underlying securities themselves, but instead uses derivatives to gain the same exposure. For example, by purchasing a FTSE 100 future as opposed to the underlying top 100 shares in the UK. Such a fund is not geared ( geared futures and options fund) and therefore losses are limited to the amount originally invested. Dresdner Kleinwort Wasserstein financial glossary

Financial and business terms. 2012.

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