| How does buying an inverse ETF give you short exposure in an index? Do they take your money and give you a short position in all of the components of an index? Or do fund managers pool money from all investors and then take one giant short position in the market? The answer to the above questions is no. That’s how a mutual fund works (without getting too technical). In the case ETFs, you as an investor are buying ETF shares.
The value of those shares goes up or down with the index the ETF is tracking. The underlying securities that form the index actually come from folks who are called Authorized Participants (basically a market maker or a large institutional investor who has access to large amounts of those securities)...............................................Full Article: Source
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