Legendary corporate raider Carl Icahn warned that trouble was brewing in the fast-growing exchange traded fund industry when he locked horns with BlackRock chief Larry Fink in 2015.
Global assets held by exchange traded funds have doubled in size in less than four years, reaching a US$6.4 trillion record at the end of 2019. This explosive growth has attracted scrutiny by regulators who are concerned about the influence of ETFs as they spread deeper and wider into financial markets worldwide. Regulators worry that ETFs could intensify market turmoil if their investors herd together in a charge for the exit.
Samara Cohen, co-head of iShares markets and investments at BlackRock, says there was no evidence that increased trading activity in HYG was causing forced selling of the underlying high-yield bonds. Pricing dislocations have also appeared in BlackRock and Vanguard’s flagship fixed income ETFs as a result of the volatile conditions across the U.S. fixed bond market.
Ensuring that ETF trading remains orderly is therefore of critical importance to the overall stability of the U.S. stock market.
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