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BlackRock CEO Fink: 'Flash Crash' Wasn't Fault of ETFs

Image: BlackRock CEO Fink: 'Flash Crash' Wasn't Fault of ETFs

Tuesday, 03 Nov 2015 02:12 PM

BlackRock Inc. Chief Executive Laurence Fink on Tuesday challenged a rival fund manager who criticized exchange-traded funds as "not safe," saying his counterpart at AllianceBernstein should "learn more" about them.

Fink was responding to a New York Times interview with AllianceBernstein CEO Peter Kraus to be published on Thursday.

ETFs "may have low fees, but they are not safe and your clients need to understand that," Kraus said in a quote that AllianceBernstein spokesman Jonathan Freedman verified was accurate.

Kraus was apparently referring to a bout of market volatility on Aug. 24 that sent a group of ETFs down some 30 percent from their prior-day close, often far below the value of their underlying stocks. Trading in 327 such funds was halted that day.

"He should learn more about ETFs," Fink responded on a panel at the New York Times' DealBook Conference, when asked about Kraus' comments in the upcoming article. "I would not be as hysterical."

Fink, whose iShares division manages $1 trillion in ETFs, said the trading issues on Aug. 24 were temporary and limited, but "a good wake-up call" nonetheless.

The Aug. 24 market tumult saw the Dow Jones industrial average plunge at the open, losing more than 1,000 points at one juncture, CNBC reported.

It wasn't the first time ETFs were at the center of a market storm. The $2 trillion industry also was faulted by some for the March 6, 2010, flash crash.

Fink, whose firm manages an industry-leading $822 billion ETF portfolio as part of its total $4.5 trillion under management, believes the problems were more related to market structure than the products themselves.

Fink repeated his company's view that fixing the issues requires a re-examination of a variety of rules and practices, including those governing when and how trading in stocks and ETFs are halted.

"We have taken this as a serious issue," Fink said. "Most people ... have decided this is a market-structure problem."

In all, 1,278 market "circuit breakers" were tripped, causing a halt in trading. Fink said that once trading resumed, the ETFs all returned to normal pricing.

"We look at this as a good wake-up call. We can't accept that kind of market action," Fink said. "I would address how you fix this."

© 2017 Thomson/Reuters. All rights reserved.

 
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BlackRock Inc. Chief Executive Laurence Fink on Tuesday challenged a rival fund manager who criticized exchange-traded funds as "not safe," saying his counterpart at AllianceBernstein should "learn more" about them.
blackrock, fink, AllianceBernstein, ETF
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2015-12-03
Tuesday, 03 Nov 2015 02:12 PM
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