ETFs to Be Wounded Not Crushed in a Stampede From Junk Bonds

If there’s a stampede for the exit in the junk bond market, it won’t be investors in exchange-traded funds that get hit hardest.

That’s the conclusion of the Financial Stability Board, whose members include the U.S. Federal Reserve and the Bank of England, published in a consultation document on Wednesday. It runs somewhat counter to warnings from Carl Icahn and Howard Marks that the funds can give an illusion of liquidity yet may be hard to get out of when market sentiment sours. It also gives a boost to ETF champions, such as BlackRock Inc.’s Larry Fink, who say the funds offer unparalleled transparency.

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