(Easybourse.com) According to billionaire Carl Icahn, the investment company BlackRock, which to date has approximately $ 4,700 billion in assets under management, would be “extremely” dangerous.
At a conference organized by the CNBC channel, Carl Icahn expressed concern about the risks associated with ETFs marketed by BlackRock. These instruments currently store approximately $ 2,100 billion. BlackRock is the leader in this market segment.
ETFs give investors the opportunity to gain exposure to a basket of securities through units that can be traded on a stock exchange like stocks.
Carl Icahn is particularly concerned about ETFs invested in high yield bonds in a rising interest rate environment.
In the event that the bubble that has formed on these risky corporate bonds were to burst, small investors who have positioned themselves in these instruments to obtain a higher return could suddenly find themselves locked in a liquidity trap. The herd behavior would push these private investors to want to sell at all costs without necessarily finding buyers in return.
Some, first and foremost Larry Fink, president of BlackRock, do not share Carl Icahn’s opinion. One of the arguments put forward is that ETFs only represent a tiny fraction of the high yield bond market, at 2.2%. Mutual investment funds, supposed to be more liquid by nature, constitute 17% of the universe valued at 1,540 billion dollars this year at the end of May, i.e. a variation of + 45% since 2010.
What is particularly problematic for the billionaire is that it is in principle possible to enter and exit an ETF throughout a trading session, unlike mutual funds. Massive ETF exits under fear could lead to several waves of panic in a day.
BlackRock reported $ 7.3 billion outflow from its ETFs (all asset classes) during the second quarter.
Posted on July 20, 2015