Never miss an update

Adidas Midnight Shoes Tubular mogochinese-29613 Runner Men's Shoes Midnight Indigo aq7445 c651b7a

Never miss an update

Adidas Midnight Shoes Tubular mogochinese-29613 Runner Men's Shoes Midnight Indigo aq7445 c651b7a -

    Adidas Midnight Shoes Tubular mogochinese-29613 Runner Men's Shoes Midnight Indigo aq7445 c651b7a
    Adidas Midnight Shoes Tubular mogochinese-29613 Runner Men's Shoes Midnight Indigo aq7445 c651b7a
    New Nike Air Jordan 1 Phat Sz 10.5 Mens 44.5 Infrared Black XI DMP Yeezy GreenNike Air Max LD Zero White Black Men SZ 7.5 - 13NIKE Air Zoom Ultra React HC White Blue Platinum 859719 114 Men’s Sz 8 Sz 9.5 WGentlemen/Ladies Reebok Classic Leather Men's Black 116 Special purchase Orders are welcome AmoyMens Nike Air Huarache Run Ultra 819685-204 Medium Olive Brand New Size 11.5Nike Air Max 95 Ultra Essential Triple Black Grey NEW 8 9 12 AM95 jcrd am1 am90Brand New Mens Nike Air Huarache Run AS QS AH8048-100 White Size 13 , NEW IN BOX HOKA ONE ONE MEN'S 12 SPEED INSTINCT 2 MIDNIGHT BLUE FREE SHIPPINGNIKE men FREE RN FLYKNIT 2017 Running SHOES 880843-405 Royal Blue,Grey size 11.5 , Vans Authentic 44 Reissue LX VN0A2Y2UKBA Malfeas Multi White Unisex Vault NewLacoste Men's Straightset Insulac CAM Leather Trainers, BrownADIDAS ORIGINALS CAMPUS LIMITED PINK SUEDE VINTAGE CREAM MIDSOLE S77704 sz 930 New Balance 703 Gore-Tex Mens Hiking Boots Vibram 9.5-13 (11.5 4E) MO703HGT , Mr/Ms Reebok Ventilator Bape Size 6 Packaging diversity New style Known for its beautiful quality , 2006 Air Jordan 21 Retro Black Red Low Size 7Y With Box NICEMan/Woman MEN'S SHOES SNEAKERS NEW BALANCE [ML597NGT] flagship store Price reduction Suitable for colorHOKA ONE ONE MEN BONDI 5 GRIFFIN / ASPHALT SHOE US 10 / / , Nike Classic Cortez Leather 749571-154 Size 7.5 FORREST GUMP QS PREMIUMMEN'S SHOES SNEAKERS ADIDAS ORIGINALS SWIFT RUN PRIMEKNIT [CG4127] , Puma Trinomic XS500 X Made In Italy White 357262 01 Men's SZ 8 , Reebok CN1010 Men Speed TR 2.0 Training Shoes black white sneakers , New Nike Men Sz 10 Air Force 180 Basketball Shoes Black 310095 011 BarkleyAPL Men's Techloom Pro Sz US 14 M Rose Gold Mesh Running Sneakers Shoes $160.00 , Nike Air Jordan Retro V.1Casual Shoes 481177 107 Size 8NIKE CLASSIC CORTEZ LEATHER "FORREST GUMP" WHITE-VARSITY RED SZ 13 (749571-154)Adidas Superstar 80s Pioneers by Nigo B35768 NWOBECCO Receptor RXP 1660 Hiking Trail Shoes Sz US11-11.5 Gore-Tex Black White NIB , Nike Air Zoom Pegasus 34 [880555-602] Men Running Shoes Speed Red/BlackNew adidas NMD R1 Duck Camo Green White Size 9 D96617 ,
    Adidas Midnight Shoes Tubular mogochinese-29613 Runner Men's Shoes Midnight Indigo aq7445 c651b7a ->Adidas Midnight Shoes Tubular mogochinese-29613 Runner Men's Shoes Midnight Indigo aq7445 c651b7a -
    Womens Leather Multi Color Buckle Flat Knee High Boots Punk Shoes Plus Size 4-10Mr/Ms Adidas Adi-Ease Skate Shoes, Collegaiate Burgundy Selling Reliable performance Complete specificationsFuntasma Vic120BPu, Women Warm Lining Ankle Boots, White, 7 UKagl shoes attilio giusti made in Italy $365 , NATURAL SOUL Women's Viva Loafer Flat, Gold, 8.5 M USNEW $128 FREE PEOPLE Women's Gold Snake Eyes Loafers Sz 37 US 7 , Zee Alexis Womens Melissa Clog Shoes Black 9 MEllie Shoe Sexy High Heel Clear Platform 6" Heel Rhinestone Sandal 601-JEWEL/CLREmanuel Ungaro Paris Pumps Shoes Charcoal Gray Embroidered Roses Womens 7.5Men's/Women's ADORE-708LG the most convenient First quality Outstanding styleMen/Women Badgley Mischka Women's Horton Flat Sandal Beautiful design Win the praise of customers professional design , New/box Stuart Weitzman Burgundy Suede Sandal - 7.5Mens Outdoor Training Climbing Sport Sneakers Athletic Shoes Breathable Casual , Nike KMTR Komyuter SE Shoes Birch Black Shadow Brown SZ ( AA0531-200 ) , NIKE LUNARMX+ GREY BLACK VOLT RUNNING Sz 10 Mens IPODNike AF1 Foamposite Pro Cup Air Force 1 Coral Stardust Black AJ3664-600 Size 14 , Nike Zoom Shift 2 University Blue/White Mens Low Basketball Shoes 2018 All NEW , Reebok Revenge Plus Mu Shoes Off-white Men CN3927 , Adidas Originals Stan Smith 999 Real Gold Leaf 24K White S80506 Mens Sz 13 ShoesPolo Ralph Lauren Size 8.5 Black Hi Top Sneakers New Mens Shoes , Florsheim Men's Casey Casual Wingtip Oxford - Choose SZ/Color , Johnston Murphy Mens Brown Slip-On Casual Dress Shoe Size 9 1/2 MMen's shoes Black Loafer Comfy Patent Leather Dress Classic Formal Shoes CasualROBERTO SERPENTINI 2085 Black Perlato Leather Slides Men Sandals 42 / US 9Vtg Florsheim Imperial 12D Burgundy Leather Dapper Wing Tip Oxfords Mens Shoes , NEW BALANCE WLAZRMN 7.5 D W 38 EU $90 NIB RUNNING SHOE WOMENS NAVY BLUE PINK , Nike Air Max 270 2018 Women 6.5Merrell Women's Ceylon Sport Zip Shoe, Castlerock, 6 M USReebok Women's Print Premier Ultk Running Shoe - Choose SZ/Color , White Mountain Women's Cayden Block Heel Booties Black Size 7.5 M ,
    Will ETFs cause the next market crash?
    ETF Watch - Jun 29, 2017
    Adidas Midnight Shoes Tubular mogochinese-29613 Runner Men's Shoes Midnight Indigo aq7445 c651b7a -

    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.

    Adidas Midnight Shoes Tubular mogochinese-29613 Runner Men's Shoes Midnight Indigo aq7445 c651b7a -

    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
    Adidas Midnight Shoes Tubular mogochinese-29613 Runner Men's Shoes Midnight Indigo aq7445 c651b7a
    Athletic Shoes