Are ETFs a danger to the stock market?
Exchange-traded funds (ETFs) are increasingly present in institutional investors’ portfolios. Kirst Kuipers of BlackRock says this is because they offer diversified access to markets and because they are cheap and easy to trade.
But the popularity of ETFs has caused an overwhelming amount of investment to represent a comparatively small volume of shares in the market. This mismatch risks exposing the underlying asset class of stock in companies, and while inflows into ETFs stand at $1.4 tn, the number of companies and their share counts have slowly been declining.