The New Paradigm For ETF, Mutual Fund, Bond Fund and mREIT's
Summary
- Review of the potential effects of the post 2008 crisis paradigm shift on Mutual Funds, ETFs, Bond Funds, mREITS and Agency mREITs.
- Potential effects of the post 2008 crisis paradigm shift in operating environment which affect material adverse changes in market making and liquidity.
- Potential effects of the post 2008 crisis paradigm shift on MBS, bi-lateral and tri-party repo.
I really only wanted to do one piece on this subject, but no, just when I thought I was out... the ETFs, Mutual Funds and Bond Funds, pulled me back in.
- Review of the potential effects of the post 2008 crisis paradigm shift on Mutual Funds, ETFs, Bond Funds, mREITS and Agency mREITs.
- Potential effects of the post 2008 crisis paradigm shift in operating environment which affect material adverse changes in market making and liquidity.
- Potential effects of the post 2008 crisis paradigm shift on MBS, bi-lateral and tri-party repo.
I really only wanted to do one piece on this subject, but no, just when I thought I was out... the ETFs, Mutual Funds and Bond Funds, pulled me back in.
Where banks have shrunk their balance sheets, shadow banking has filled the void.
Read the statement above in bold, again, as it is a subtle and important distinction. This new paradigm places ETFs, mutual funds and bond funds (all heavily invested in equities, in some cases bonds, and leveraged debt) and mREITs into the same operating pot as MMFs - money market funds and CLO - collateralized loan obligations.
How are they all in the same pot? The way they transact to fund their operations i.e. quality of market making based upon number (quantity) and volume - size of transactions and market participants, and the liquidity thereof.
Re: the above, from a FED report:
The largest liquidity transformation is found in mutual funds and ETFs, which have grown significantly. As liquidity is normally robust, investors expect to be able to sell out of positions in market downturns, but may find liquidity is absent when they most need it.
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Read the statement above in bold, again, as it is a subtle and important distinction. This new paradigm places ETFs, mutual funds and bond funds (all heavily invested in equities, in some cases bonds, and leveraged debt) and mREITs into the same operating pot as MMFs - money market funds and CLO - collateralized loan obligations.
How are they all in the same pot? The way they transact to fund their operations i.e. quality of market making based upon number (quantity) and volume - size of transactions and market participants, and the liquidity thereof.
Re: the above, from a FED report:
This missive was published as an exclusive to Seeking Alpha. To access the ENTIRE text for FREE on Seeking Alpha, please click here. The Nattering One does not receive remuneration if you register, only satisfaction.The largest liquidity transformation is found in mutual funds and ETFs, which have grown significantly. As liquidity is normally robust, investors expect to be able to sell out of positions in market downturns, but may find liquidity is absent when they most need it.
There is no cost involved and it has been our experience that if you exert control (by unchecking a box of two) over your communications settings in your Seeking Alpha profile, your email inbox will not be polluted with one bit of Spam (not even the cured pork shoulder variety. Tasty even.)
As we are now a "contributor" at Seeking Alpha, our published articles, instablog and comments can be found here. Please continue to follow The Nattering Naybob here and at Seeking Alpha. We thank you for your support.
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