---
title: "Replication method (physical, sampled, synthetic)"
description: "The replication method is how an index fund or ETF reproduces its index: holding every constituent, a representative sample, or a swap that delivers the index return."
canonical: https://fundfactsapi.com/glossary/replication-method
published: 2026-09-04
updated: 2026-09-04
publisher: FundFacts API
---

# Replication method (physical, sampled, synthetic) (Physical replication, Full replication, Optimised sampling, Synthetic replication, Swap-based ETF)

> The replication method is how an index fund or ETF reproduces its index: holding every constituent, a representative sample, or a swap that delivers the index return.

The **replication method** describes how an [index fund](https://fundfactsapi.com/glossary/index-fund) or [ETF](https://fundfactsapi.com/glossary/etf) delivers the return of its [benchmark](https://fundfactsapi.com/glossary/benchmark). There are three common approaches.

- **Full physical replication** holds every index constituent at its index weight. Simple and transparent, but costly for indices with thousands of small or illiquid members.
- **Optimised sampling** holds a representative subset chosen to match the index's risk characteristics, accepting a little extra tracking error in exchange for lower trading costs.
- **Synthetic replication** holds a substitute basket of securities and enters a total return swap with one or more counterparties who pay the index return. UCITS rules cap counterparty exposure and require collateral.

## Why it matters

Replication determines what an investor actually owns and which risks they carry. Physical funds expose you to securities lending and sampling error; synthetic funds add counterparty and collateral risk but can track hard-to-access markets closely and, for some US equity indices, benefit from dividend withholding tax treatment. It also changes how you should read a holdings file: the top holdings of a synthetic ETF are the substitute basket, not the index.

## In the API

The structure string and the holdings list carry the practical evidence of the method.

```json
{
  "structure": "UCITS ETF, physical replication",
  "profile": { "kind": "index-tracking equity ETF" },
  "topHoldings": [
    { "name": "Example Corp", "weight": 4.8, "isin": "US0000000001" }
  ]
}
```

Example values. Compare with [top holdings](https://fundfactsapi.com/glossary/top-holdings) and [tracking difference](https://fundfactsapi.com/glossary/tracking-difference).

## Common pitfalls

- Sampled funds can hold fewer than half the index constituents, so `keyFacts.holdings` may be far below the index count without anything being wrong.
- Synthetic ETFs sometimes publish both the substitute basket and the index constituents. Check which one you are displaying.

## In the FundFacts API payload

- `structure`
- `profile.kind`
- `topHoldings`
- `keyFacts.holdings`

## About FundFacts API

FundFacts turns any fund or ETF ISIN into one dated factsheet (fees and KID costs, the 1–7 risk indicator, holdings, sector and country exposure, returns) read from the fund house's own documents: as a client-ready PDF under your firm's name for advisers and wealth managers, as JSON through its API for developers, or inside ChatGPT and Claude through its MCP server.

FundFacts works inside ChatGPT and Claude as a connector (a remote MCP server): ask about any fund or ETF by ISIN, ticker or name and the assistant answers from FundFacts' dated figures, fees, risk, holdings, exposure and returns, with fund cards, side-by-side comparisons, holdings overlap and portfolio look-through.

- Free API key, no card: https://fundfactsapi.com/signup
- Documentation: https://fundfactsapi.com/docs (OpenAPI: https://fundfactsapi.com/openapi.json)
- MCP server: https://fundfactsapi.com/api/mcp (set-up for every client: https://fundfactsapi.com/mcp-server)
- Pricing: https://fundfactsapi.com/pricing
- Site index for AI assistants: https://fundfactsapi.com/llms.txt
- Informational data, not investment advice.