Archives – Klarman: ETFs Are Dangerous But A Boon Value Investors

Seth Klarman in his 2016 has some choice words regarding ETFs

Wall Street has seen its fair share of controversial investments throughout its history, but one of most controversial, yet popular products has to be the ETF.

Despite numerous warnings from some of the world’s most renowned investors, ETFs continue to attract record levels of investor cash. Last year, investors added a total of $282 billion to ETFs, a record figure, surpassing the previous annual all-time high of $244 billion set in 2014.

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As investors gobbled up ETFs last year, they were simultaneously dumping mutual funds. For example, in the week after Donald Trump’s election, investors flooded $27 billion into equity ETFs according to Lipper and EPFR fund flow data. However, during the same period, a U.S.-based equity mutual funds posted $3.4 billion of outflows.

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Klarman: ETFs Are Dangerous But Should Help Value Investors
It remains a mystery why ETFs continue to attract such massive quantities of cash when so many high-profile investment figures have warned against the use of the product. The latest investing figurehead to warn against the dangers of ETFs is Seth Klarman, who devoted a portion of his year-end 2016 letter to the subject.

Klarman has pulled together the shocking figures of the ETF industry.


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