| July 2012 |
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| An Imperfect Storm: Declining Market Liquidity & Rise of Credit ETFs | 
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Changing banking regulations have drained liquidity from the corporate bond markets. At the same time, explosive growth in bond exchange-traded funds (ETFs), whose sheer size and tendency to trade as a bloc, are distorting an ever-shrinking market. While these converging forces are likely to result in a more volatile and challenging investment environment, we see opportunity for managers equipped to understand the fundamental risk and reward of individual credit securities.
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