Never miss an update

Nike Platinum/White Air Huarache Nike Men's Shoes White 15731/Pure Platinum/White 318429-111 f20b45e

Never miss an update

Nike Platinum/White Air Huarache Nike Men's Shoes White 15731/Pure Platinum/White 318429-111 f20b45e -

    Nike Platinum/White Air Huarache Nike Men's Shoes White 15731/Pure Platinum/White 318429-111 f20b45e
    Nike Platinum/White Air Huarache Nike Men's Shoes White 15731/Pure Platinum/White 318429-111 f20b45e
    Men's Brand New Air Jordan 1 Trek Men's Athletic Fashion Sneakers [616344 004]Adidas NMD R1 Glitch Camo Gray Linen CQ0858 Men's Size 8.5 NWOB*RARE* NIKE AIR INTERNATIONALIST LT 17 Running Mens 9 retro trainer racer nswNike Men's Air Zoom Elite 9 Running Shoe , 29 New Mens WOB Adidas Alphabounce 5.8 Zip Black Shoes BW1386 Mens 8.5-14Custom Nike Roshe One "Galaxy Space Jam" Men's Size 9 Supreme , adidas Originals PW Tennis Hu PK Pharrell Williams Primeknit Oreo Men CQ2630MERRELL Moab 2 Smooth J42511 Outdoor Hiking Trekking Athletic Shoes Mens NewNIKE AIR FORCE 1 AF1 FOAMPOSITE CUP CORAL STARDUST SZ 12 600 Max 1 JordanNew 9.5 adidas Pure Boost ZG Shoes Energy AQ2929 Blue White ultra Mens adios , Men's Nike Air Huarache Athletic Fashion Sneakers 318429 003 "Triple Black"adidas Mens PW TENNIS HU Navy/Navy/White - B41807 , Nike Air Zoom Vomero 12 Grey Black Volt Men Running Shoes Sneakers 863762-002Puma Suede Classic x Chain Men New Reed Yellow Gold Lifestyle Sneakers 367391-02 , Nike Air Max 1 Premium SC Jewel Swoosh Olive Gold 918354-201 size 8.5 90 95 97NIKE SB DUNK HIGH BOOT Size 11 Military Brown Black 536182-203 Mens ShoesAdidas Crazy 1 Vivid Mint/Night Grey-Red C75737 Men's SZ 7.5Asics Onitsuka Tiger Mexico 66 Black Red Grey Leather Men Shoes D4J2L-9023NIKE MEN'S FLYKNIT MAX RUNNING SHOES MULTICOLOR STYLE 620469 404 Sz 8.5 , Nike Air Jordan 7 VII Retro Marvin The Martian Black 304775 029 Size 10Nike Lunarcharge Premium LE Black/White Oreo Size 10.5 Flyknit Jordan BoostNike Jordan Formula 23 Low Black White Men Casual Shoes Sneakers 919724-021NEW Under Armour Team Architech 3DI - Running, Cross Training (Men's 11)Lacoste Sneakers Ampthill 118 CAM Casual Fashion Shoes Leather Olive Green New , Nike Air Huarache Mens Shoes Sz 11.5 Black Anthractie Gym Running TrainerNEW Nike Air Trainer Max '94 Low Summit White Men's SZ 12 (880995-100) , Nike Air Max 90 LTR 652980 012 Mens US 13 New DS Wolf Grey White RareNIKE AIR MAX 1 ANNIVERSARY WHITE AQUA NEUTRAL GREY BLACK 908375 105 SIZE 8 NEW , MAN ' S SHOES NIKE JORDAN IMPACT TR 854289-030 ,
    Nike Platinum/White Air Huarache Nike Men's Shoes White 15731/Pure Platinum/White 318429-111 f20b45e ->Nike Platinum/White Air Huarache Nike Men's Shoes White 15731/Pure Platinum/White 318429-111 f20b45e -
    Mens Maverick Cowboy Boots The Style - A3R003**NEW** Asics Gel DS Trainer 23 Mens Runner (D) (9090)Vintage Womens Buckle Velvet Mary Janes Block Heels Shoes Round Toe Coaurt PumpBella Pin-Up Tan Leatherette Peep Toe Pump Shoe High Heel Shoes HeelsNEW G.I.L.I. Suede Pumps with Cut-out Detail - Seville SIZE 6.5M ORANGE , JOHN FLUEVOG MINSTREL ADAGIO SHOES 10 BROWN LEATHER HEELS PUMPS ariaAndre Assous Women's Estrella Platform Sandal, Taupe/Black, 8 M US , Charlotte Olympia Debbie Gold Metallic Leather & Linen Platform Pump 35.5 US 5.5 , Blowfish Women's Dirry Flat Sandal - Choose SZ/ColorBrooks Women's Ghost 9 Black/Sparkling Grape/Ceramic Running shoes - size 6.5 M , Gentle Souls Women's Iona Flat Slide Sandal 10 B(M) US , NIKE SB ZOOM BLAZER MID SZ 12 SEQUOIA GREEN MEDIUM OLIVE GUM BROWN 864349 300Mens ADIDAS ZX FLUX WEAVE Grey Textile Running Trainers B23600 , NIKE ZOOM FLY SEQUOIA GREEN-WHITE-MEDIUM OLIVE SZ 14 [880848-301]Mens Womens Safety Shoes Trainers Working Steel Toe Cap Hiking Work Boots New Y1VINTAGE BURGUNDY MADE IN USA TONY LAMA ENGINEER RODEO BUCKAROO BOSS BOOTS 10 ENIB $425 Bruno Magli Calabria Leather Penny Loafer (US 8 ) , Skechers Women's Flex Appeal 3.0 Insiders SneakerAsics Gel-DS Trainer 23 (Women's) Running. Black/SilverLadies Skechers - CALMLY Casual Fashion Shoes Branded Slip-on , ASICS GEL-Kayano 23 Running Shoes - Women's Size 8.5, Silver/Pink Glow/Purple , NIKE FREE 5.0 DB (GS) JAKE WOLF GREY-CRIMSON SZ 7Y-WOMENS SZ 8.5 [639871-065] , Nike Womens Air Max LD-Zero Running Trainers 896495 Sneakers Shoes 001 , CRIME WOMAN CASUAL FREE TIME SNEAKER SHOES LEATHER CODE 25230S17B , Nike Air Max 95 Red Stardust 918413 600 WomenOTOT BELFAIR BLACK LEATHER CHAIN STRAP ACCENT ANKLE BOOT SIZE US 9.5M HOTSPERRY TOP-SIDER TAN LEOPARD PRINT LEATHER HIGH ANKLE BOOT SNEAKERS SZ.10 , Matisse Brown Distressed Leather Knee High Boot 8.5 M , CARLOS BY CARLOS SANTANA WOMEN'S INFATUATION KNEE-HIGH BOOTS GREY LEATHER SZ 5.5Loeffler Randall Women's Taylor (Stitched Fabric), Eclipse/Ivory, 9 M US ,
    Will ETFs cause the next market crash?
    ETF Watch - Jun 29, 2017
    Nike Platinum/White Air Huarache Nike Men's Shoes White 15731/Pure Platinum/White 318429-111 f20b45e -

    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.

    Nike Platinum/White Air Huarache Nike Men's Shoes White 15731/Pure Platinum/White 318429-111 f20b45e -

    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
    Nike Platinum/White Air Huarache Nike Men's Shoes White 15731/Pure Platinum/White 318429-111 f20b45e
    Athletic Shoes