ETFs were originally designed to hold the stocks of indexes, like the S&P500, Dow Jones Industrials, or the S&P/TSX Composite. ETFs are like mutual funds except they trade on stock exchanges. Now, ETFs are used as vessels for all kinds of investments like equity, bonds, commodities, currencies, futures and even other ETFs. Like a Swiss army knife they have many uses and applications. They can give an exposure to different assets classes, used for hedging or can be combined with other investments. There are even ETFS that will go up in value when the underlying investments go down. Although, originally designed to hold equity, an ETF is not equity!!!
Equity is defined as the ownership in a corporation in the form of common stock or preferred shares. Therefore if an ETF does not contain equity or positively track an equity index then from an asset mix perspective it is not equity. If an ETF contains bonds , it should be considered fixed income. If the ETF contains gold then it should be considered commodities or precious metals from an asset mix perspective. If an ETF is designed to increase in value if the market goes down it should be considered a short position not a long position.
The Bottom Line
An ETF is only considered equity if the underlying investments are equities. If you own ETFS, do not assume that your asset mix summary properly classifies your ETFs. Therefore you might have to calculate it yourself. Although a child knows the difference between a coffee mug and coffee you cannot assume that our large financial institutions know the difference between an ETF and equity.