Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Support MFO
Donate through PayPal
Exchange-traded funds: Emerging Trouble in the Future?
"There is a potential mismatch between the liquidity of the funds and the liquidity of the assets they own. A stampede out of ETFs might cause a fire sale of assets that would ripple through the financial system."
"Imagine that one big investor in an ETF with, say, a 10% stake, wanted to sell its holding in a single day. There might not be ready buyers for such a large holding, causing the ETF to fall to a price below the value of the assets it owns."
This is especially true of ETFs like GLD which many mutual funds hold shares of. Many if not most mutual funds have clauses regarding large redemptions either by daily limits or timeframes needed to perform the transaction.
Comments