What is a physically backed ETF?

A physically backed ETF generally holds the underlying assets directly. For equity ETFs, that means the fund owns shares of the companies in its portfolio. For some commodity ETFs, "physical" can mean the fund holds bullion in custody.

Physical backing can make the exposure easier to understand: the fund owns the assets it claims to track (subject to any lending policies and sampling strategies).

Still, "physical" doesn't eliminate risk. Market risk remains, and for commodities you still want to check custody arrangements, fees, and how closely the ETF tracks the spot price after costs.