Examples of exotic ETFs include those that have been constructed around a very specific theme, such as cryptocurrency ETFs, robotics ETFs and physical gold ETFs. While these ETFs may still track an underlying index, they are likely to provide less diversification benefits than a mainstream ETF as it is focused on a very niche part of the market.
Additionally, exotic ETFs may not provide the same liquidity or transparency as mainstream ETFs that have been tried and tested in bouts of extreme market volatility during different market cycles. Our recent article on the resilience of vanilla ETFs during COVID-19 discussed their robust nature and ability to provide investors liquidity even during severe market corrections. Full article here;