Never miss an update

El Naturalista N5340 Espadrilles Women's 4493 Women's Suede Stitched Seam Ballerina Ballerina Pumps New c572ad9

Never miss an update

El Naturalista N5340 Espadrilles Women's 4493 Women's Suede Stitched Seam Ballerina Ballerina Pumps New c572ad9 -

    El Naturalista N5340 Espadrilles Women's 4493 Women's Suede Stitched Seam Ballerina Ballerina Pumps New c572ad9
    El Naturalista N5340 Espadrilles Women's 4493 Women's Suede Stitched Seam Ballerina Ballerina Pumps New c572ad9
    LADIES SHOES/FOOTWEAR - Cabello slip on ss navy shoe size 39/8 , Gino Ventori Century Womens Comfortable Leather Laser Cut FlatsPlanet Shoes Comfort Leather Jamie Black Size 7Mango Suede Leather Babouches - JS51 60DIANA FERRARI ZIZI SHOES SANDALS SZ 8 BLACK $139.95 , Gentlemen/Ladies freepeople moccassin shoes bargain fashionable Excellent functionNew Top End Pless Black Womens Shoes Casual Sandals Sandals FlatLADIES SHOES/FOOTWEAR - ankle boot Rohde black size 6.5USNEW HARRISON INDY II SENIOR GIRLS/WOMENS SCHOOL SHOESNEW Windsor Smith Dani Crimson Red Suede Loafer , Skechers Performance Women's Go Walk 4 Pursuit Walking Shoe **NIB**TONY BIANCO LADIES RED/ BLACK SNAKE PRINT FLAT SHOES NEW , naturalizer Thea3 Platform Espadrilles Flats, Blue Marble, 8 US / 38 EU , Pons Quintana Amanda Leather Ballerina Shoes Gold LN18 18New I Love Billy Marlena Red Womens Shoes Casual Sandals Sandals FlatNEW Genuine Crocs Women Isabella Huarache 2 Flat W Black/BlackNew Gamins Garter Black Floral Womens Shoes Casual Shoes Flat , Clarks Ladies Shoes Griffin Mia Black Patent D Fit (R13A)Skechers Cali Women Bare Foot Flip Flop Natural Color Imported Sandal SleeperBRAND NEW WOMENS DIANA FERRARI STYLISH HEEL SHOES SANDALS SZ 9.5 ~~~ QUEENA , Brand New Authentic Melissa Jason Wu Doll Fem Red Size EU35/36Brand New Authentic Soludos Flamingo Embroidered Smoking Slipper size US 10Isabella Anselmi 37 Nude Blush Dress Heels Size 37 Party Cut Out BuckleLADIES SHOES/FOOTWEAR - CABELLO black shoe size 39/8Mimco New Play It Again Pump , New Womens Ted Baker Metallic Immet Synthetic Shoes Ballerina Slip On , Lucky Brand Cahill Deconstructed Flat Loafers 632, Black, 9.5 US / 39.5 EU , NEW GINO VENTORI HERO WOMENS COMFORT SOFT LEATHER EVERYDAY FLATSLADIES SHOES/FOOTWEAR - Sundowner Sandal Claudia brown woven ,
    El Naturalista N5340 Espadrilles Women's 4493 Women's Suede Stitched Seam Ballerina Ballerina Pumps New c572ad9 ->El Naturalista N5340 Espadrilles Women's 4493 Women's Suede Stitched Seam Ballerina Ballerina Pumps New c572ad9 -
    Line Friends x Reebok Revenge Plus Shoes Athletic Green Pink SZ4-13 LimitedBrand New DS Adidas Ultra Boost W Core 2.0 Black Womens US 8.5 Mens US 7.5Vans - Authentic Lo Pro Womens Casual Shoes - WhiteFANE Footwear - Urbanette Range - Snake Skin , SAS Metro 8.5 Cream Beige Slip-On Loafers Women's ShoeWomens Crocodile Pattern Sythetic Leather Shoes Pointed Metal Buckle Loafer Flat , Canfield Women's Harmony Walking Flexx Shoes PW Minor 71337 Clay Sz 8.5 Leather , AG73 GUESS shoes black patent leather women pumpsL'AUTRE CHOSE women shoes Black leather clog pump with ankle strapCasadei Skyhigh Ankle Strap Platform Sandals Brown Leather EU size 10L-3210298 New Fendi Yellow & Tobacco Zucca Pumps Heels Size US-6.5/Marked-36.5 , New adidas Originals Los Angeles LA Trainers Black/White S31533 , Harley Davidson Men's Chase Low Hiking Shoe Gray Style D93394 , PUMA Men's Mostro OG Ankle-High Fashion Sneaker , Nike Comme Des Garcons Air Force One Black Lows Nike Air Dino CDG AF1Caterpillar Men's Indiana 2.0 ST/Black Industrial and Construction Shoe,Kamik Men's Bushman Waterproof Comfort Rubber Work Boots Black EK0021 , [STICO] Mens Chef Kitchen Shoes Non-Slip Simple Rubber Comfortable Nurse BLACK , Mens Too Boot New York Stylish Black Leather Oxfords Shoes Sz. 9.5 MCole Haan 2.Zero grand Packable Saddle Knit Oxfords Black White SIZE 9 C25259ASICS Women's Gel-Venture 6 Running-Shoes Black/Carbon/Neon Lime 8 B(M) USJessica Simpson Women's Jenee Ankle Strap Sandal Black Sparkle Velvet , Shih Tzu Dog Running Shoes For Women-Free ShippingMan's/Woman's WOMEN'S SHOES SNEAKERS NEW BALANCE [WS247UI] Selling Elegant style Direct businessNIKE Womens Nike Air Max Sequent 3 908993-100 WHITE/HYPER JADE-BLACK Size 11PUMA Women's Ignite Evoknit Lo WN's Cross-Trainer Shoe - Choose SZ/Color , MAISON MARTIN MARGIELA MM6 Paneled leather sneakers Trainers UK4-4.5 EU37.5 US7 , Womens Black Longhorn Leather TONY LAMA Tall Western Boots Sz 6 B Cowgirl D8904LSkechers Women's Hi Lite-Metallic Leather Fashion - Choose SZ/color , Born BOC Rhonda Brown Suede Leather Shoes Western Cowboy Boots Rivet Sz 8.5 NWB
    Will ETFs cause the next market crash?
    ETF Watch - Jun 29, 2017
    El Naturalista N5340 Espadrilles Women's 4493 Women's Suede Stitched Seam Ballerina Ballerina Pumps New c572ad9 -

    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.

    El Naturalista N5340 Espadrilles Women's 4493 Women's Suede Stitched Seam Ballerina Ballerina Pumps New c572ad9 -

    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
    El Naturalista N5340 Espadrilles Women's 4493 Women's Suede Stitched Seam Ballerina Ballerina Pumps New c572ad9