A recent commenter inquired as to how the silver exchange traded fund (ETF) works:

If the ETF iShares Silver Trust (SLV) goes under, do the holders of the ETF shares still have their interest backed by bullion? Is there any chance of default?

According to the frequently asked questions about the fund provided by iShares, the trust’s objective is to reflect the price of silver at any given time (minus expenses and liabilities). Funds like these make it simple for investors to own silver without having to provide the storage space for it.

If the trust were to terminate, the assets would be liquidated and distributed to the remaining shareholders. The trust will terminate in 2046 on the 40th anniversary of its creation, if termination doesn’t occur before then.

In the event of termination, holders would still have their interest backed by bullion, as the assets of the fund are segregated from the bank assets at Barclay’s Bank (the ETF’s provider) or the trustee of the fund, which is The Bank of New York.

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