Bill Gross: The risks have been transferred from Banks to ETFs

Bill Gross in his latest investment outlook warns that “While Dodd Frank legislation has made actual banks less risky, their risks have really just been transferred to somewhere else in the system.” Gross specifically points to the new "Shadow Banks" - Mutual Funds and ETFs - saying “While private equity and hedge funds have built-in “gates” to prevent an overnight exit, mutual funds and ETFs do not. That an ETF can satisfy redemption with underlying bonds or shares, only raises the nightmare possibility of a disillusioned and uninformed public throwing in the towel once again. Long used to the inevitability of capital gains, investors and markets have not been tested during a stretch of time when prices go down and policymakers’ hands are tied to perform their historical function of buyer of last resort. It’s then that liquidity will be tested.” Gross outlines 6 key risks that could trigger a “run" on the shadow banks (ETFs and Mutual Funds) (VIEW LINK)


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