Icahn Take Note: At Least ETFs Give You A Price

Industry experts have responded to recent disparaging comments against ETFs this month from some of the world’s largest investors

Editor, etf.com Europe
Reviewed by: Rachael Revesz
Edited by: Rachael Revesz

Industry experts have responded to disparaging comments made by billionaire activist investor Carl Icahn and the world’s largest distressed debt investor Howard Marks that ETFs are “dangerous” and do not provide liquidity by arguing that ETFs give investors a price and ability to trade – even if it’s not exactly always the price they want.

Speaking at a Bloomberg event on liquidity on Thursday, a panel of experts were questioned on Carl Icahn’s comments about BlackRock being a dangerous company by promoting high yield bond ETFs, which trade even when the underlying market may not be so active or priced transparently.

Antoine Lesne, head of ETF sales strategy EMEA, State Street, said: “At least you’ve got a price. Even if it’s slightly away from the price you want.”

“There is clearly less liquidity in bond markets than in 2005,” he added. “But once you know how the index works and the rules of the fund, and what they [market makers] can do, I don’t think investors are at more of a risk or disadvantage [in an ETF] than being able to trade [directly] in high yield bonds.”

Hector McNeil, CEO of WisdomTree Europe, said it is in market makers’ best interests to provide liquidity as they make profit. He also said mutual fund managers control trading, so their funds are less liquid.

“There is a liquidity inherent in ETFs that aren’t available in any other products,” he said.

Paolo Giulianini, head of ETF trading and advisory at UniCredit Bank, pointed to how ETFs work when their underlying markets are closed – like in Greece and China this year and Egypt in 2011.

“I wouldn’t say we are used to it but we have seen this before and you need to be prepared for this kind of scenario,” he said. “The answer is always the same. You should know how the index rules work and how different ETF issuers work. You can have the same ETF issuer that can treat the same stock differently if the ETF is listed across the world: this is not because the ETF issuer is crazy or there isn’t one way to do things, but because the regulator is asking for different requirements.”

Chris Mellor, executive director, equities product management at Source UK Services, referred to the U.S.-listed Greek equity ETF (ticker GREK) which has continued to trade while the Athens Stock Exchange has been closed.

“This has given investors an extra layer of liquidity. Yes, [even if] there are some potential issues like widening of spreads,” he said.

A feature on how ETFs provide liquidity at primary and secondary market level can be read here.


Rachael Revesz joined etf.com in August 2013 as staff writer. Previously an investment reporter at Citywire, she has a background in writing content for retail financial advisors and has covered a wide range of subjects in finance. Revesz studied journalism at PMA Media, which has since merged with the Press Association. She also holds a B.A. in modern languages from Durham University, as well as CF1 and CF2 financial planning certificates from the CII.