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The ETF Illusion: An Inside Look – Seeking Alpha 

Full Article: Seeking Alpha

As I’ve said more times than I care to remember, the problem with all of this is that when you stop using something, it invariably falls into disrepair. That disrepair, combined with the absence of banks willing to lend their balance sheet in a pinch, means there’s no liquidity for the assets that underpin these HY ETFs

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  • Tried and failed.
    Tried and failed.February 25, 2017"I agree, the secondary market infrastructure for bonds (Corp & HY) is expensive, inefficient and in decline. Everyone knows that, whether they invest in individual bonds, mutual funds or ETFs. The secondary market actually profits from inefficiency, it will therefore never fix itself. You can measure the secondary bond market inefficiency by observing the H216 revenues for trading desks and platforms. That uplift largely represents the trading cost to investors. A…"
  • Sundown
    SundownFebruary 24, 2017"This has been a long topic of debate. I think there is some merit to the story, but I think ETFs are labeled as the problem when mutual funds have a much larger foot print and the same issues. The true underlying problem is the mechanics of the HY fixed income market. When times of stress occurs, nothing in that market flow smoothly. If the market has a false sense of security that the HY ETF is the magic bullet to the market during times of stress, I think they are m…"

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Sundown
Member
This has been a long topic of debate. I think there is some merit to the story, but I think ETFs are labeled as the problem when mutual funds have a much larger foot print and the same issues. The true underlying problem is the mechanics of the HY fixed income market. When times of stress occurs, nothing in that market flow smoothly. If the market has a false sense of security that the HY ETF is the magic bullet to the market during times of stress, I think they are mistaken. I do think the ETF will perform it’s… Read more »
Tried and failed.
Member
I agree, the secondary market infrastructure for bonds (Corp & HY) is expensive, inefficient and in decline. Everyone knows that, whether they invest in individual bonds, mutual funds or ETFs. The secondary market actually profits from inefficiency, it will therefore never fix itself. You can measure the secondary bond market inefficiency by observing the H216 revenues for trading desks and platforms. That uplift largely represents the trading cost to investors. An exchange traded proxy has far superior cost efficiencies. Just look at the volume/outstanding chart for proof of where the market is going. ETFs will continue to boom as a… Read more »
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