Never miss an update

ETNIES NEW mogochinese-21032 Mens Scout Shoes Black 21031/ White// Gum BNWT c655aea

Never miss an update

ETNIES NEW mogochinese-21032 Mens Scout Shoes Black 21031/ White// Gum BNWT c655aea -

    ETNIES NEW mogochinese-21032 Mens Scout Shoes Black 21031/ White// Gum BNWT c655aea
    ETNIES NEW mogochinese-21032 Mens Scout Shoes Black 21031/ White// Gum BNWT c655aea
    Skechers Arcade II Demps Casual Men's Shoes Size 8.5LAKAI Skate Shoes MARC JOHNSON OXBLOOD SUEDENike Roshe One K Team Red/Black-Pale Grey AJ0068-600 Men's SZ 11Vans Men's Shoes "Chima Ferguson Pro" -- Black/Mahogany , AIR JORDAN LX WHITE PURE PLATINUM 897992 100 ATHLETIC SLIP ON MEN'S SIZE 9.5 NEWNew Balance 501 Navy Blue ML501CVC Men's SZ 7 , Gentleman/Lady ETNIES Skateboard Shoes FADER LS BLACK/CHARCOAL/GUM Aesthetic appearance Lush design Comfortable and naturalNike Men's Flex Show TR 4 Cross Trainer University Red White Size 11.5 , Adidas Originals STAN SMITH Solid Shock Red Men's Size 11 Sneaker S80032 , VANS CHUKKA LOW DANIEL LUTHERAN DARK CHARCOAL SZ SIZE MENS 7.5 SHOES SKATE SK8 , Under Armour Micro G Engage BL H 2 Running Shoe Men's 128511-100Vans Men's Shoes "Sk8-Hi Decon" -- (Canvas) Navy/True White , Nike Vapor Pro Low Football cleats 511340 100 Mens New White Black , CONVERSE CHUCK TAYLOR ALL STAR II HI SZ 9 RED SALSA WHITE CT 150145CNike Hyperlive TB Mens Basketball Shoes Sneakers 834488 141 Low Blue White US 18 , Mustang Fashion Basketball Sneaker Mens Navy Leather Trainers , DUDE SHOES NEW Mens Wally Braided Shoes Sage BNWTMen's Nike Free Train Versatility Training Shoes Black / Crimson 11 833258 018 , Nike Mens Magistax Onda II TF Yellow Soccer Shoes 10 Medium (D) BHFO 9891NEW AUTHENTIC NIKE AIR TRAINER 2 MEN'S US 10 , Nike Zoom Paul Rodriguez 2.5 Dark Loden/Metallic Cognac Men's 386613-301 SZ 13Nike Roshe Two - Navy/Black/Sail/Volt - Size 9 US - 844656 400 Athletic RunningPuma St Trainner Evo Sd Training Men's Shoes , DONALD J. PLINER Italian Tennis Oxford Leather Trim/Linings Sturdy Black 12MBrooks Ravenna 7 Running Shoes Blue/Lime Men's US Size 11.5 (E,0) , New Balance 420 Vintage Grey Men's MRL420ST SZ 9.5 , Saucony Shadow Original Men's Running Shoes Size US 9 M (D) S2108-682 , Nike Men's Blazer Low Leather Casual ShoeNIKE AIR FORCE 1 AF1 PREMIUM MID SNEAKER HIGH WHITE/ PURPLE SIZE 11.5
    ETNIES NEW mogochinese-21032 Mens Scout Shoes Black 21031/ White// Gum BNWT c655aea ->ETNIES NEW mogochinese-21032 Mens Scout Shoes Black 21031/ White// Gum BNWT c655aea -
    FRYE Women's Ilana Shootie Suede Boot - Choose SZ/Color , Bona Fide Nike Lunarstelos Mens Running Shoe (D) (001) , Men/Women Womens Black Boots High security luxurious Seasonal promotion , Versace 19.69 D20 VERNICE ROSSO VERNICE NERO ballerina shoes Women's Red AU , Clarks FIANNA PHOENIX Long Black Leather Boots rrp - UK5.5 / UK7 , Man's/Woman's EVE-01 Satin Black Diverse new design special promotion A balance between toughness and hardness , NATURALIZER Womens Samantha Black Embroidered D’orsay Flats Shoes Sz 7 ZV-777Pleaser FLAMINGO-809-Wht Pat/Wht 8" Heel Heel, 4" Platform FLAM809/W/M NEW NIBGentlemen/Ladies Leopard Womens Heel Pumps 6.5 Elegant shape a wide range of products leading the fashion , Amoretta Grey Black Suede Franco Sarto Womens Pump , kurt geiger shoes / patent leather heels/ UK:4 (RRP: NEW) , Women's Open Toe Rhinestone High Stiletto Heels Ankle Straps Slingbacks Shoes SzANNE KLEIN Designer Natural/Raffia High Heels Size 7 MJack Rogers Sz 8 Adeline Sandals Women's Gold & White w Bow Flip Flops , Reebok Size 14 TWISTFORM BLAZE 3.0 MTM Grey Red Running Sneakers New Mens ShoesAdidas D Lilliard 2 Mens Basketball Shoe Size 10 Black/Blue B42386 , Nike Air Zoom Structure 20 Women's Running Shoes 849576 003 Size 5.5Adidas ORIGINALS MEN'S ZX FLUX PK Primeknit Sneakers Ice Blue S75973 Sz 12 NEW , NEW DS Air Jordan XI Retro 11 Low Varsity Red Cherry White 528895-102 size 11Adidas Ultra Boost 3.0 Multicolor Size 10.5 , Rocky Forge Waterproof Work Boot RK025 8.5W , Mens Sequins Silver Slip on loafers Shoes dress fashion loafer Nightclub ShoesStylish Retro Breathable Bowknot Men's Casual Real Leather Loafers Slip On ShoesLoake black nappa moccasin mens Made in Italy slip on leather loafer , Salvatore Ferragamo Mens Shoe Size 11 extra wide EE Tie Oxford Black Leather , Men Tan Color Formal Shoes, Men Leather Dress Shoes, Handmade Leather Shoes , Skechers Performance 14739 Womens Go Step Lite- Walking Shoe- Choose SZ/Color. , Gentleman/Lady bx33220 Hogan white woman's sneakers Year-end special promotions Carefully selected materials Popular tide shoesECCO Womens Casual Hybrid 2 Golf Shoe- Pick SZ/Color. , New Nine West Women Black Side Zip Leather Boots Size 5
    Will ETFs cause the next market crash?
    ETF Watch - Jun 29, 2017
    ETNIES NEW mogochinese-21032 Mens Scout Shoes Black 21031/ White// Gum BNWT c655aea -

    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.

    ETNIES NEW mogochinese-21032 Mens Scout Shoes Black 21031/ White// Gum BNWT c655aea -

    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
    ETNIES NEW mogochinese-21032 Mens Scout Shoes Black 21031/ White// Gum BNWT c655aea
    Athletic Shoes