Never miss an update

Irregular Choice Of Nick Of Time 5191 Womens Pastel mogochinese-5192 Blue Synthetic Shoes 9f76e4f

Never miss an update

Irregular Choice Of Nick Of Time 5191 Womens Pastel mogochinese-5192 Blue Synthetic Shoes 9f76e4f -

    Irregular Choice Of Nick Of Time 5191 Womens Pastel mogochinese-5192 Blue Synthetic Shoes 9f76e4f
    Irregular Choice Of Nick Of Time 5191 Womens Pastel mogochinese-5192 Blue Synthetic Shoes 9f76e4f
    Reebok Print Smooth 2.0 ULTK 2 UltraKnit Coal Gray Women Running Shoes CN1742Gola Harrier Glimmer Womens Navy Suede Trainers , Converse Chuck Taylor All Star Big Eyelets OX Black White Green Women 560671C , Puma Basket Bow SB Wn's Classic Casual Lifestyle White/Winsome Orchid 367353 02New Balance 530 MC Running Classic Women's W530MC Suede (Size US8) New air gelNike Wmns Duel Racer Knit Light Bone Mushroom Women Running Shoes AA1107-001Nike Air Huarache Run Ultra Br Womens Trainers Pink Peach Branded FootwearSkechers Go Walk Revolution Ultra Grey Pink Womens Running Shoes 15667-BKMT , MERRELL Sz US 8 Women's Shoes Runners Zip Up Walking Light Tan As New , Nike Tanjun GS Pink White Kids Girls Women Casual Shoes Sneakers 818384-602Nike Flex Experience RN 6 Womens Running Shoe (B) (008) | BUY NOW! , MERRELL MOAB Womens Sz US 9.5 Shoes Grey Lilac GoreTex Hiking Vibram Sole As NewReebok Supreme Runner White Grey Women Running Training Shoes Sneakers CN2918Nike Duel Racer Womens Sneakers Running Shoes Black Beige Pink 927243-201 US 7Mizuno Maximizer 20 Wide White Pink Women Running Shoes Sneakers K1GA1801-59Nike Women's Zoom Fit Running Shoes Training Purple Walking Blue NWT 704658-400New Balance KS300BKP W Wide Black White Kid Junior Slip On Shoes KS300BKPW , Rocket Dog Jumpin Gogo Trainers Canvas Fashion Sneakers Womens Shoes , Reebok Club C 85 Diamond Black Gum Women Classic Shoes Sneakers Trainers BD4425 , Mizuno Spark 3 [K1GA180424] Women Running Shoes Black/Aqua-White , NIKE AIR MAX JEWELL TRAINERS UK SIZE 3 896194 010Mizuno Spark 3 [K1GA180454] Women Running Shoes Black/Orange-White , Skechers Ultra Flex-Bright Future Black White Women Casual Shoes 12849-BKWWmns Nike Flex Trainer 7 MTLC VII Black Metallic Grey Women Training 921706-001 , Puma Basket Heart Lunar Lux JR Cream Tan Kid Youth Junior Casual Shoes 365993-02 , adidas Samba OG Black/White NEW!RPP$150 Womens US5-11, Mens US4-10 , Mizuno Wave Sonic Pink White Women Running Shoes Trainers Sneakers J1GD17-3468 , Wmns Nike Air Huarache Run White Blue Green Womens Running Trainers 634835-109 , adidas Originals FLB W Flashback Raw Pink Off White Gum Women Sneakers BY9301
    Irregular Choice Of Nick Of Time 5191 Womens Pastel mogochinese-5192 Blue Synthetic Shoes 9f76e4f ->Irregular Choice Of Nick Of Time 5191 Womens Pastel mogochinese-5192 Blue Synthetic Shoes 9f76e4f -
    Teva Women's Arrowood 2 Knit Trail Sneaker Midnight Navy Leather/Knit Size 9.5 , Giuseppe Zanotti Military Green Suede Peep Boots/Booties Size:Versace 19.69 B1670 VITELLO BROWN Brogue Women's Brown AU , Steven by Steve Madden Beti Womens Boots Black Nubuck 9 US / 7 UKGentlemen/Ladies CUTIEPIE-06 PU Leopard Crazy price, Birmingham Make full use of materials Vintage tide shoesNew L’amour Alicia style in Red kid leather size 7USAUTH YSL Saint Laurent Women Leather Pumps Shoes 39.5YSL sz 10 / 40 Yves Saint Laurent Tribtoo Nude Beige Leather Platform Pump Shoes , LOUBOUTIN Black Patent Silver Glitter SO PRETTY Point Toe Pumps Heels 37.5/7 NEW , Nike Men's Free Og 14 Woven Ankle-High Running ShoeNIKE SB STEFAN JANOSKI MAX SZ 9.5 SEQUOIA GUM BROWN LIGHT BONE BLACK 631303 302 , adidas CTRY O g03079 black1/legacy/cougum Size 9.5 , Mens Skechers 'Flex Advantage' Trainers Dali 52124 , Air Jordan X 10 Retro Powder Blue White Black Size 10 310805 106ADIDAS ULTRA BOOST 3.0 "TECH RUST" BLACK BRONZE CG4086 ALL Sizes AUTHENTIC , Mens Slip On Genuine Leather Punk Ankle Boots Pointed Toe Cuban Heel Shoes Hot#JUSTIN BOOTS Full-Quill Brown Sz 9.5 D Men Ostrich Skin Leather Cowboy Boots , Fashion Mens Spike pointy Toe Punk Studded rivet Loafers casual dress shoes New , Sio Pebble Grain&Faux Suede Moc Toe HighTop Casual Sneaker Tan/White Style TysonNIB NEW Dunham WADE New Balance Memory Foam Boat MCN422DM BY NEW BALANCE , Skechers Performance Womens GO Walk Lite- Loafer- Select SZ/Color. , adidas Tubular Shadow Shoes Women's 6.5 greyTempur-Pedic Men's Flinn Closed Back Clog Slipper Charcoal Sullco Fabric Size , Vans Women's SK8 Hi Green Olive Suede Fringe Shoes 721277 Size 6 SOLD OUT!NIKE WMNS AIR PEGASUS 92/16 WOLF GREY BLACK WHITE 845012 002 US WMSN SZ 9 , NEW COLUMBIA Peakfreak Xcrsn Xcel Trail Shoe 9 NIB Hike Orange FREE SHIPMan's/Woman's Devious Women's Fabulous 3035 Purple PVC/Glitter Consumer first Online professional design , Aravon Women's Standon Fisherman Wedge Sandal Bronze Leather2019 New Fashion Occident Women Stilettos High Heels Buckle Ankle Boots Shoes ChWomen’s Salomon Leather Mountain Contagrip Mountaineering Hiking Boots Size 6.5
    Will ETFs cause the next market crash?
    ETF Watch - Jun 29, 2017
    Irregular Choice Of Nick Of Time 5191 Womens Pastel mogochinese-5192 Blue Synthetic Shoes 9f76e4f -

    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.

    Irregular Choice Of Nick Of Time 5191 Womens Pastel mogochinese-5192 Blue Synthetic Shoes 9f76e4f -

    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
    Irregular Choice Of Nick Of Time 5191 Womens Pastel mogochinese-5192 Blue Synthetic Shoes 9f76e4f
    Athletic Shoes