BlackRock’s ETF unit iShares says the financial products “performed precisely as they are designed to do” during the recent market volatility triggered by worries the Federal Reserve could begin to withdraw monetary easing.
The role of ETFs “continues to grow in the global capital markets as investors seek efficient, tailored access to different investment exposures,” said Mark Wiedman, global head of iShares at BlackRock (NYSE: BLK), in an open letter to investors made public on Monday. “This rise in prominence has increased focus on how ETFs perform, particularly in stressed markets.”
Despite unsettled underlying markets, “ETFs in many cases performed better than ever in allowing investors to move quickly and efficiently in and out of investment exposures,” he wrote.
BlackRock and other ETF providers have responded to criticism the investment products, particularly bond funds, didn’t closely track the value of their underlying holdings during a recent sell-off. [ETF Providers Push Back Against Bond Fund Criticism]
ETF manager WisdomTree Investments (NasdaqGM: WETF) last week published a point-by-point response to negative media reports. [ETFs: People Fear What They Don’t Understand]
“To ensure more investors understand this underlying trend and how ETFs work, we are embarking on a fresh program for investor education,” wrote Wiedman at iShares.
“ETFs empower investors to buy and sell investment exposures immediately, throughout the trading day, at current market prices,” he said.
The iShares executive explained that ETFs are traded in two linked markets.
First, investors buy and sell ETF shares on stock exchanges. This is known as the secondary market.
Also, large blocks of ETF shares are traded between financial institutions known as authorized participants. This is known as the primary market “and it is how the price of the ETF and the underlying assets stay close to one another,” Wiedman said.
Next page: ‘Both markets have performed well’