The main problem with ETFs is marketability. Since they are separate cos., the financial condition of the issuer is of no concern. The management co. can always be changed. However, if the public is worried about a Lehman or a Barclay's, it is certainly possibility that the daily volume will dry up and they will be more difficult to buy or sell.
Actually, hedge funds were the first group to go belly up. If you remember Long Term Credit, which Greenspan bailed out, had been leveraged at 100 to 1. And, more recently, several very large hedge funds, including the famous Carlyle Group, into which George H.W. Bush tried to get Osama Bin Laden's daddy to put his money. The main problem is that they borrow at large margin and they can hurt a lender. But, my guess is that most of them have already gotten killed by the recent economic grenades. |
