Equity swaps have many applications. For example, a portfolio manager with XYZ Fund can swap the fund's returns for the returns of the S&P 500 (capital gains, dividends and income distributions.) They most often occur when a manager of a fixed income portfolio wants the portfolio to have exposure to the equity markets either as a hedge or a position. The portfolio manager would enter into a swap in which he would receive the return of the S&P 500 and pay the counterparty a fixed rate generated from his portfolio. The payment the manager receives will be equal to the amount he is receiving in fixed-income payments, so the manager's net exposure is solely to the S&P 500 (and risk that the counterparty defaults). These types of swaps are usually inexpensive and require little in terms of administration.