Never miss an update

Lotto Leggenda Tokyo Pearl Shibuya Shoes Block T4574 Mens Shoes Pearl 11464 Orange Running Sneaker 568b830

Never miss an update

Lotto Leggenda Tokyo Pearl Shibuya Shoes Block T4574 Mens Shoes Pearl 11464 Orange Running Sneaker 568b830 -

    Lotto Leggenda Tokyo Pearl Shibuya Shoes Block T4574 Mens Shoes Pearl 11464 Orange Running Sneaker 568b830
    Lotto Leggenda Tokyo Pearl Shibuya Shoes Block T4574 Mens Shoes Pearl 11464 Orange Running Sneaker 568b830
    Adidas CQ2206 Men Stan smith Running shoes white grey sneakers , AF875 SERAFINI shoes blue textile leather men sneakersNike Mens Air Presto Essential Shoes Burg/Grey/Black 848187-603 , Nike Air Versitile 3 - Men's Black/Game Royal/White 4430004AB793 SUN 68 shoes green suede textile men sneakers , Adidas Jeremy Scott Ostrich Slim Brown Q23512 Men's , Vans Trainers Summer shoe blau Authentic Decon P. Suede , SAVE $$$ | New Balance M860BY7 Mens Runner (2E)Adidas EQT Support 93/17 White Blue Boost BZ0592 Originals Running NEW Sz 8-13Adidas Crazy Explosive Boost 2016 Xeno Maroon/Cream B39467 SIZE 15Adidas AC8563 Equipment 10 Running shoes black white sneakersNIKE - 818137-002 - HYPERDUNK LUX - Men's Shoes - Wolf Gray White Free ShippingPuma R698 Lite XList Oil Green Navajo Size 10 New Mens Shoes Fast Shipping , Air Jordan 1 Retro High Blue/black Size 12New Balance Men's Fresh Foam 1080v7 Blue Running Sneakers 1124 Size 12.5 X- WideAdidas B37911 Stan smith Running shoes white red sneakersNIKE Black Reax 8 TR Cross-Trainers - Men 12 US , AF869 SERAFINI shoes creamy white red leather men sneakers , ADIDAS CAMPUS PRIDE B42000 rainbow gazelle manchester stockholm superstar stan sGentlemen/Ladies Jollys Men's Fashion Shoe Navy Modern technology high quality Popular recommendationNike Air Huarache Mens 318429-112 Ultramarine Solar Red Running Shoes Size 12BX201 SKECHERS shoes blue textile men sneakers , ADIDAS ORIGINALS SUPERSTAR MEN'S SHOE BZ0197 UK6.5-11 12'adidas Ace 15.1 SG Leather Promo Mens Soccer Boots / Cleats - Orange BlackMen's/Women's Saucony Shadow 6000 - S70222-8 Exquisite (middle) workmanship Bright colors Popular recommendation , Men's New Balance 501 Leather Casual Shoes White/Gum MZ501IOF 100 , Shoes Cl Leather Reebok White Men 49799Nike Court Royale Trainers Mens White/White Sports Shoes Sneakers FootwearNIKE AIR HUARACHE "SEQUOIA-DARK STUCCO" MEN'S US SIZE 12 STYLE ,
    Lotto Leggenda Tokyo Pearl Shibuya Shoes Block T4574 Mens Shoes Pearl 11464 Orange Running Sneaker 568b830 ->Lotto Leggenda Tokyo Pearl Shibuya Shoes Block T4574 Mens Shoes Pearl 11464 Orange Running Sneaker 568b830 -
    Gentlemen/Ladies Ann Demeulemeester Shoes Modern technology the most economical Caramel, gentlePrada Womens Boots Size 38 8 Dark Brown Leather Round Toe Mid Calf In Box $990 , Mizuno Wave Amulet 5 W Yellow Pink Womens Running Shoes J1GB148169Gentleman/Lady Witchery Slides Size 40 Never Worn Crazy price new Complete specificationsFuntasma Arena-2012 Circus Heel Boots - Costume,Fancy Dress,Shoes,Black,Gothic,G , Office Women’s Fedora Loafers Black (Leopard Leather) 6 UK , Dansko Womens Maci Full Grain Raspberry Slide US 5Women Bowknot Pointed Toe Zipper Casual Block Heels High Top Shoes Boots , Beautiful Champagne Reed Evins Black Satin Beaded Slid On Mules Size 7STUNNING DONALD J PLINER VANA BLUE/BLACK SLING BACK OPEN TOE PUMPS SIZE 6.5MB4890 Mocassin indien Huron Femme fabriqué au Canada , Alexander Wang Jada Chain Chunky-Heel Sandals 36.5 MSRP: $795.00 , Nike Mens Flex 2016 RN Athletic Running Shoes Sneakers Blue 830369 400 New 9 12New adidas Crazy 8 PK ADV Primeknit Burgundy White Size 9.5 BY4366 KobeCREATIVE RECREATION CR0850001 MODICA Mn's (M) Black/Black Textie Athletic ShoesMerrell Women's Capra Venture Mid GTX Surround Hiking Boots Black, 8 M US AdultJordan Men's True Flight NEW AUTHENTIC Black/Metallic Gold 342964-026Caterpillar Men's Streamline Composite Toe Work Shoe Black Leather Sneakers , Cole Haan Suede Distressed Mens Boot Brown size 11.5 $328 h2 , Robert Talbott Men's Nicasio Moc Toe Penny Loafer Sand Suede Business ShoesMezlan 17126 Mens Slip-On Loafer COGNAC LEATHER SZ 11.0 M NEW DISPLAY D8093 , NEW Womens Montrail FluidBalance Trail Running Shoes Grey Icy/Juicy Retail $100 , Nike LF1 Duckboot 17 GS Triple Black Kid Youth Casual Shoes Sneakers 922807-001Gentlemen/Ladies Brooks Womens Adrenaline Gts 18 durable International choice Known for its beautiful qualityAdidas Women's Adizero Ubersonic 3 PW Pharrell Williams Tennis S81005 , Børn 'Brie' Black Leather 3" Heel Knee High Boots - Women's Size 7.5Gentleman/Lady BareTraps Ysidora Flat Comfort Ankle Boots Easy to clean surface Price reduction retail price , Party Womens Shoes Ankle Boots New Pointy Toe Stilettos Elegant Pull On FashionDan Post McRae 01-MR41704-BN97 Women's 3" Brown Metatarsal Composite Toe Boots , Fontana 2.0 Women's Ankle Boots Black Velvet Embroidery Side Zip Fastening ,
    Will ETFs cause the next market crash?
    ETF Watch - Jun 29, 2017
    Lotto Leggenda Tokyo Pearl Shibuya Shoes Block T4574 Mens Shoes Pearl 11464 Orange Running Sneaker 568b830 -

    There’s no doubt that the last 2 years has seen the coming of age of ETFs. With what was once an unknown type of investment quickly becoming a $30b industry in Australia ($3 trillion globally). However, as ETFs have moved from the unknown to the flavour of the month, an increasing number of commentators have called on the risks ETF investors face, with some even stating that ETFs will be the source of the next market crash. Today we take a look at some of the claims as to why some believe there are so many risks associated with ETFs.

    Claim 1: ETFS are blindly pushing up stock prices

    Many have written about share markets being at record highs. In an interview with the AFR, Wilson Asset Management chief Geoff Wilson discussed his portfolios’ current high weightings to cash due to concerns of market over-valuations. 

    US based fund manager FPA capital called ETFs “Weapons of Mass Destruction”and stated “The flood of money into passive products is making stock prices move in lockstep and creating markets increasingly divorced from underlying fundamentals”. The argument they make is as ETFs blindly invest in stocks in their chosen index and ignore the underlying fundamentals of these companies. This causes these companies prices to be bid up to prices that do not support their fundamentals (ie a bubble), and eventually history repeats, the bubble bursts and markets crash.

    What do we think?

    ETFs account for around 10% of US stocks’ market value and less than 1% in Australia. In the US at least this is not an immaterial amount. However, the active managers whom ETFs have taken business from generally have mandates which force them to invest a certain percentage in the market. As a result, active managers have always been investing in expensive markets and pushing up prices. Additionally, what is currently called by many analysis as expensive equity markets could also be attributed to global record low interest rates rather than an uptick in passive investing. In saying that, since the last major market crash (the 2008 GFC), the proportion of total assets in ETFs are considerably higher and continual growth of passive investing must be considered as a possible cause of markets becoming expensive.

    Recently we’ve seen Vaneck reweight their huge Junior Gold Miner’s ETF as they approached 20% limits in some of their smaller holdings. This meant selling out of these small gold miners which saw large falls in some of these shares (some of which was blamed on hedge funds looking to capitalise on the opportunity). This is a great example of the influence that ETFs can have, albeit this is at the small end of the market.

    Claim 2: ETFs will sell on mass and compound market falls

    One of the known weaknesses of a managed fund structure is the ability for investors to fairly easily redeem their funds, meaning at times of market falls, when a fund manager may find the best investment opportunities, the investors in the fund are panicking and redeeming their investments, meaning the fund manager becomes a forced seller rather than a buyer. This was one of the reasons Forager decided to turn their Australian Share Fund (FOR) into a Listed Investment Trust, where the pool of capital for them to invest was guaranteed.

    The one thing stopping simple redemption of managed funds during market crashes is another one of its weaknesses, which is managed funds are not simple to trade, and require the investor to apply to the fund to redeem units. This can involve filling out paper forms, and an apathetic investor may simply not be bothered.

    What do we think?

    One of the greatest advantages of ETFs is also one of its weaknesses when it comes to the above, with ETFs able to be traded on the ASX, a panicked investor simply has to log into their online brokerage account and hit the sell button. If a buyer does not exist on the other side of the trade, the ETF issuer is forced to then sell the underlying holdings which could very well begin a contagion effect.

    However, we come back to the size of the ETF market, at around 1% of the Australian market and 10% of the US market. Investors selling underlying stocks that they own through their broker will have the exact same impact as the reasonably small proportion of ETFs. We believe the actual impact of this event would be not materially higher than what currently exists.

    Claim 3: ETFS with low liquidity will be hard to sell if markets fall

    Peter Switzer recently spoke about a client who had received advice that an ETF with low liquidity would be difficult to sell if markets fall. The argument being that without a liquid market the seller would be unable to find a buyer on the other side of the trade and would need to sell at a significant discount.

    What do we think?

    One of the somewhat unknown components of ETFs is the role of the market maker. Essentially the market maker’s role is to provide liquidity to an ETF, so that if there is not an existing ETF unit on the other side of an ETF trade, the market maker must create an ETF unit for a buyer, or absorb an ETF unit for a seller. It is then the ETF issuer's role to buy or sell the underlying assets that the ETF holds. This means that regardless of an ETF’s liquidity, a market maker will always exist to buy an ETF off an investor even if the markets in free fall.

    However, there is a caveat to the above. Market makers make a profit by charging a spread between the buy price and the sell price of an ETF. The spread becomes the market maker’s profit margin. In a free falling market it may be difficult for the market maker to price the underlying investments forcing them to create a huge spread between the buy and sell price to protect their margins. This was seen in the 2015 Dow Jones ‘Flash Crash’, where some ETFs dropped 30% when the market makers were unable to price the underlying securities.

    Lotto Leggenda Tokyo Pearl Shibuya Shoes Block T4574 Mens Shoes Pearl 11464 Orange Running Sneaker 568b830 -

    Finally, an ETF is only ever as liquid as its underlying holdings. ETFs which invest in illiquid investments may have great liquidity, but if the underlying investments do not, this will likely be reflected in falls in both the underlying holdings and the ETF during market falls. This may be more likely to play out at the small cap end of the sharemarket and within unlisted asset classes.

    Claim 4: ‘Exotic’ ETFs are higher risk

    In a recent RBA publication, economist Michelle Cunningham discussed the risks faced with some of the more exotic ETFs, those that are classed as ‘synthetic’ ETFs, meaning the ETF issuer does not hold the underlying investments, rather they rely on a counterparty to pay the return. These ETFs are generally referred to as ‘Synthetic’ or ‘Hedge fund’ in their title. Cunningham raised the risk that the counterparty may default on their obligation, so an additional level of risk exists for the investor.

    What do we think?

    We agree with Cunningham’s analysis, an additional level of risk certainly exists with these ETF structures, however in many cases this is the only way to access to investment strategy that the ETF provides. Nevertheless, investors should be aware of the additional risks that exist.


    There’s plenty of arguments in both camps about ETFs role in future market crashes. There’s no doubt the world has moved into uncharted territory with the rise of passive investing & ETFs in particular. We do believe, however, that some of the risks are overblow. Nevertheless, investors should be aware of these risks in order to make informed investing decisions. What do you think?


    Previous Article

    2017 Financial Year ETF and LIC Performance Table

    Next Article

    New Fixed Interest ETFs expand options for investors

    Leave a Reply
    Find a Fund
    Lotto Leggenda Tokyo Pearl Shibuya Shoes Block T4574 Mens Shoes Pearl 11464 Orange Running Sneaker 568b830
    Athletic Shoes