Never miss an update

New Balance MFL574FD D Balance Grey MFL574FD & White Fresh NB Foam Classic Retro Running Shoes NB ad83180

Never miss an update

New Balance MFL574FD D Balance Grey MFL574FD & White Fresh NB Foam Classic Retro Running Shoes NB ad83180 -

    New Balance MFL574FD D Balance Grey MFL574FD & White Fresh NB Foam Classic Retro Running Shoes NB ad83180
    New Balance MFL574FD D Balance Grey MFL574FD & White Fresh NB Foam Classic Retro Running Shoes NB ad83180
    Men's Size 9 Rare Adidas NMD Runner Primeknit Glitch Camo Black White Shoes , Men's Air Jordan 3 Retro Wool Basketball Shoe 854263-004 , Gentlemen/Ladies jordans superior discount price Selling new productsNike Shoes - 2005 OG Jordan 20 XX Varsity Red - Black White Laser - Size 14 , SALOMON SPEEDCROSS 4 GTX 383181 MEN'S BLACK TRAIL RUNNING TRAINERS TREKKING , VANS New TH Slip-On 66 LX Woven/Nubuck Vault Men Size USA 9 , Men's Nike Air Max 95 NO SEW Athletic Fashion Casual Sneakers 616190 007 Grays , Adidas Originals Superstar [B41996] Men Casual Shoes White/Navy-Gold , NEVER WORN Nike Lebron James 12 XII EXT Cork Basketball Shoes 768829-100 Size 10nike KD 8 mens basketball trainers 749375 807 sneakers shoes , NIKE AIR PRESTO PREMIUM "BURGUNDY ASH" MEN'S US SIZE 11 STYLEBrooks Glycerin 14 Mens Running Runner Shoe (D) (452)Nike Flyknit Trainer Pale Grey Black Men's Size 13 DS New Authentic AH8396001nike ID air max 2014 mens trainers 641423 991 us 8 eu 41 sneakers shoesNike Air Jordan Melo M11 Black Metallic Silver 716227-010 8-14 retro 1 11 3 4 7Nike Air Max 97 Ultra UL 17 CARGO KHAKI OLIVE GREEN BLACK AH7581-300 sz 11.5 , Nike Air Unlimited Black/White-Deep Emerald David Robinson 889013-001 Men's SZ 6NIKE AIR JORDAN 32 XXXII LOW MENS SZ 8.5 BLACK MTLLIC GOLD CAMO TIGER AA1256-021Nike Hyperdunk 2017 Flyknit Nikelab cargo khaki men's shoe 917728 300 NEW , NIKE AIR ZOOM 90 IT GOLF SHOES WHITE COOL GREY OG INFRARED 844569 101 sz 14 , Nike Air Max Plus TN Athletic Shoes Men Sz 10 Black Summit White 898014-001 New , Nike Air Jordan VII 7 Retro Black/Gold GMP Golden Moments Pack 304775-030 SZ 11 , NEW NIKE ZOOM TERRA KIGER 4 - 90563-010 MEN'S Black/Anthracite/Cool Grey c1 , NEW Travel Fox shoes Sz 9 Green Red-Yellow - vintage uk troop spx 80s 90s 1980sNike Mercurial Superfly V DF FG MEN SIZE 8 - 831940-801 , Adidas x Mastermind EQT Support Ultra MMW Blue Mystery Ink CQ1827 LIMITED , new Air Max 1 Essential 537383 041 running shoes BLACK/DRK RYL BL/ANTH Size 9Nike Air Max Plus EF In Tuned Air Velvet Brown Sail AH9697 212 Sizes 10 & 12 , Adidas Pureboost Mens Running Trainers Sneaker BA8893
    New Balance MFL574FD D Balance Grey MFL574FD & White Fresh NB Foam Classic Retro Running Shoes NB ad83180 ->New Balance MFL574FD D Balance Grey MFL574FD & White Fresh NB Foam Classic Retro Running Shoes NB ad83180 -
    Ladies Clarks Flats The Style - Amorie DanceCRAZY COOL. "Eva" WHITE LEATEHR SANDALS BY ALEXANDER WANG Size 36Proenza Schouler Womens Fringe Slipper Pointed Toe Shoe Black Leather US 9 M , Pleaser High Heel Black 5" Buckled Knee High Boot Side Zip DELIGHT-2049/B/MBEAUTIFUL STUART WEITZMAN ABSTRACT HEELS SIZE 7 B GREAT SHAPEKelsi Dagger Glori wedge sandals leather snake 7.5 Md NEWChristian Louboutin Beige Patent Leather "No Prive" Slingback Pumps SZ 37.5 , PRE OWNED CHRISTIAN LOUBOUTIN ROUND TOE PUMP SIZE 37Vionic Womens Rest Eve Toe Post Sandal Shoes, Bronze Metallic, US 6 Wide , NIKE WOMENS FREE RN RUNNING SHOES , MENS PUMA ROMA BASIC in colors WHITE / LIGHT GRAY SIZE 13 , Puma x Blaze Of Glory X Meek Bike Life - White - Mensadidas Men's Freak X Carbon Mid Baseball Shoe, Collegiate Royal Q16567 Size 12 , ~NIB MEN'S NIKE FREE TR VERSATILITY AMP~BLUE YELLOW~ RUNNING TRAINING FITNESSNike Air Jordan Pure J Trial Sample 2010 White Red Black 414759-101 Men's 18Asics Gel-Flux 4 Mens T7149-9090 Black Silver Athletic Running Shoes Size 8 , Mens Brown Cole Haan Chukka Boots Size 8 C11858 U G13Nike Air Jordan 4 Retro Premium Ginger 8 non Pinnacle Fragment 819139‌-‌205NWT POLO RALPH LAUREN Mens Dark Green Canvas Tie Front Sneakers Size 9.5DSaint Laurent Black Suede London 20 Jodhpur Gold Glitter Cropped Low Ankle 44 11Mephisto Gianni Shoes - Men's Size 8 - Gray , New Bates Mens Black Oxfords Dress Shoes Size 10C , Bruno Magli Men's Size 7.5 Brown Leather Tassel Slip On Loafers , 14725 Skechers GOstep Lite Reign Womens Slip On Walking Skimmers , NIB! Womens Nike Air Huarache Gladiator Sandals QS AH7702 500 sz 8 Fuchsia GlowNike Flyknit Lunar2 Running Shoe 620658-815 WOMENS Sz 11.5 , Adidas CQ2826 Women Superstar Bold Running shoes black pink white SneakersMen's/Women's Naot Women's Rongo selling price Modern and stylish fashion cheaper , $160 size 8.5 Dolce Vita Lennon Black Suede Heel Bootie Womens Ankle Shoes NEW , Via spiga Womens Aston Pull On Ankle Bootie Black Leather Size 9.5 M US ,
    Will ETFs cause the next market crash?
    ETF Watch - Jun 29, 2017
    New Balance MFL574FD D Balance Grey MFL574FD & White Fresh NB Foam Classic Retro Running Shoes NB ad83180 -

    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.

    New Balance MFL574FD D Balance Grey MFL574FD & White Fresh NB Foam Classic Retro Running Shoes NB ad83180 -

    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
    New Balance MFL574FD D Balance Grey MFL574FD & White Fresh NB Foam Classic Retro Running Shoes NB ad83180
    Athletic Shoes