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Beware the hidden dangers of exotic ETFs

Jeremy Spira

May 05, 2017

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2 responses to “Beware the hidden dangers of exotic ETFs”

  1. Jeremy Spira

    Mark, we have seen several examples where NAV of a plain vanilla ETF diverges from price over multi-day periods. This is often the case where large volumes are being traded in an illiquid instrument. Unfortunately regulatory restrictions prevent me from naming specific ETFs (as this would be equivalent to commenting on a particular share), but if you have a look at the plot of NAV to price for a few illiquid issues that track mainstream indices you’ll probably find periods of divergence. Some providers even quote distributions of differences between NAV and price – these are typically centred on zero but many have small tails around the mean.

  2. Mark Northway

    Provides good food for thought. Could we please see examples of “some temporary divergences from underlying indices” in plain vanilla ETFs?

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