“I recently saw in the financial press a claim that some ETFs were derivatives in disguise, especially US -listed ETFs. If that is the case, what categories of ETFs should one beware of (commodities, shares, bonds), and what sort of due diligence should one exercise?”

Eoin Treacy's view Thank you for raising an important question. With the proliferation, increasing complexity and sophistication of exchange traded products it is more important than ever to be aware of just what one is investing in. David posted an interesting primer from Citywire in Comment of the Day on December 19th which you may find of interest.

As a rule of thumb, never purchase any investment product you do not understand. All ETFs are by definition derivative products which have, often hidden, charges such as management and trading fees.

A number of leveraged exchange traded products are designed for intraday traders and unsuitable for medium to long-term investors. Funds holding passive positions in commodity futures contracts are unsuitable for buy-and-hold investors because they make no attempt to manage interest rate, roll and management costs.

ETFs are a positive financial innovation but, as with anything, it is important to do due one's due diligence before purchasing.