Why Might an ETF Manager Choose a Synthetic Structure over a Physically-Backed One for a Complex Index?

A synthetic structure is often chosen for complex or illiquid indices because it is more cost-effective and easier to implement. Instead of having to physically acquire and manage a large, complex, or illiquid basket of assets, the manager simply enters into a swap agreement, transferring the burden of tracking and rebalancing the index to the counterparty.