These funds can also make portfolio trading more efficient. When an asset manager wants to offload a bunch of bonds, intermediaries are willing to purchase them as a whole package because they can turn around and sell the inventory into ETFs. Last year, Wall Street’s bond desks executed at least $88 billion worth of such trades, according to an analysis by Morgan Stanley. That’s compared with virtually none two years ago.
“This may be—while a large blip on the radar—a blip on the radar,” Sullivan says. “I don’t think anyone is running for the hills from ETFs.”
Huszczo certainly isn’t. “We’re not going to rush to judgment over a couple of days. Investing for our purposes is long term,” he says. “ETFs did what we expected them to do.”
This article was provided by Bloomberg News.