While not on the low end of the perceived liquidity spectrum, good example of this concept is the recent explosion in the PIMCO Total Return ETF (NYSEArca: BOND). The ETF originally launched with $100 million in assets priced at $100 per share. Now, the fund has over $1 billion in assets but has only appreciated to about $104. If this were a stock that has gather over $900 million in a couple of months, the stock would probably not be priced at around $104.
With the help of alternative liquidity providers, investors may efficiently move large, bulk trades in small and large ETFs, without worrying about their price impact on the ETF.
For past stories in this series, visit our “What is an ETF?” category.
Max Chen contributed to this article.