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Size Does Matter (To a Point): Study of ETF Liquidity

by Michael Johnston on June 11, 2009

As the ETF industry has exploded on to the scene in recent years, sponsors have aggressively launched funds in an attempt to gain market share. While many of these new ETFs have attracted sufficient investor funds to justify continued operation, some have failed to garner a level of investment necessary to support an active, liquid market and been shuttered. And then there are those that remain in business but are cited as having “insufficient liquidity.” Although there are certain rules of thumb – assets under management (AUM) of $25 million and daily volume of 25,000 are often cited as “liquidity thresholds” – there is no hard evidence to support these guidelines. In an effort to determine where illiquidity ends and an active market begins, I analyzed the impact of size and daily volume on the liquidity of various ETFs. [click to continue…]

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Handicapping Potential iShares Buyers

by Michael Johnston on June 8, 2009

In April of this year, Barclays announced that it had agreed to sell its iShares line of ETFs to private equity firm CVC Capital Partners for $4.4 billion. So why all the speculation lately that BlackRock and other banks are in the running to acquire the fund family? As part of its deal with CVC, Barclays inserted a “go shop” clause, which allows it to seek out potential acquirers until June 18. With that deadline less than two weeks away, BlackRock and Bank of New York Mellon have emerged as frontrunners, but the fate of iShares is still murky. Here’s a look at several companies rumored to be interested in making an acquisition: [click to continue…]

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