Growth of synthetics in emerging markets

Synthetic instruments have become increasingly important for large parts of the asset management community as they seek to gain exposure to an everwider variety of asset classes and regional markets. The array of instruments on offer can include delta one products, contracts for difference (CFD), total return swaps (TRS), portfolio swaps, futures, forwards, warrants and options. While real money accounts do venture into the market, hedge funds have been the primary users of synthetic financing. Synthetic financing allows hedge funds to take leveraged exposure through derivatives that replicate the performance of a referenced asset.